Hilltop Holdings (NYSE:HTH) Will Pay A Dividend Of $0.18

The board of Hilltop Holdings Inc. (NYSE:HTH) has announced that it will pay a dividend on the 22nd of May, with investors receiving $0.18 per share. This payment means the dividend yield will be 2.5%, which is below the average for the industry.

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Hilltop Holdings' Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Hilltop Holdings has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio of 35%shows that Hilltop Holdings would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 4.0% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 43%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

View our latest analysis for Hilltop Holdings

Hilltop Holdings Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2016, the annual payment back then was $0.24, compared to the most recent full-year payment of $0.72. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. In the last five years, Hilltop Holdings' earnings per share has shrunk at approximately 4.1% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Hilltop Holdings' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Hilltop Holdings has been making. We don't think Hilltop Holdings is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Hilltop Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.