Home Bancshares, Inc. (NYSE:HOMB) has announced its upcoming transition to ex-dividend status in four days. The ex-dividend date is pivotal in determining the shareholders eligible for dividends. To qualify for the forthcoming dividend, trades need to be settled on or before this date. Consequently, stock acquisitions made on or after November 14 will not qualify for the December 6 dividend.
The bank has set the dividend at US$0.18 per share, a figure derived from last year's total payout of $0.72 per share. With a current share price of $21.06, this implies a trailing yield of 3.4%. Dividends play a crucial role in long-term investment returns if sustained, underscoring the importance of evaluating dividend sustainability and earnings growth.
Dividends are typically paid out from profits, and if the payout ratio exceeds earnings, the sustainability of the dividend might be jeopardized. Home Bancshares' payout ratio stands at a moderate 34% of profit, suggesting an affordable and sustainable dividend. A lower payout ratio often indicates a safer dividend during potential business downturns.
Over the past five years, Home Bancshares has reported a consistent 19% annual growth in its earnings per share. The bank's prudent approach to its payout ratio and steady earnings growth over the years reflect its commitment to maintaining a sustainable dividend for its shareholders.
InvestingPro Insights
Drawing upon real-time data from InvestingPro, we can deepen our understanding of Home Bancshares' financial health and future prospects. InvestingPro data highlights that Home Bancshares exhibits high earnings quality, with free cash flow exceeding net income. This is a positive sign for investors as it shows that the company's earnings are reliable and not merely accounting profits.
Another key point from InvestingPro is that the company has maintained its dividend payments for 18 consecutive years, and in fact, has raised its dividend for 10 consecutive years. This consistency in dividend payments, coupled with the company's moderate payout ratio of 34%, underscores the sustainability of its dividends.
In terms of valuation, Home Bancshares is trading at a low P/E ratio relative to its near-term earnings growth. This suggests that the stock might be undervalued, offering a good entry point for investors seeking both growth and income.
Finally, it's worth noting that six analysts have revised their earnings downwards for the upcoming period. While this might seem concerning, it's important to remember that Home Bancshares has been profitable over the last twelve months and analysts predict it will continue to be profitable this year, according to InvestingPro.
For additional insights and tips, consider exploring the InvestingPro platform, which offers a wealth of information to help you make informed investment decisions. Currently, InvestingPro has over 20 more tips available for Home Bancshares.
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