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. The dividend yield is 2.5% based on this payment, which is a little bit low compared to the other companies in the industry.

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Hilltop Holdings' Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

Hilltop Holdings has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Hilltop Holdings' payout ratio of 35% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next year, EPS is forecast to fall by 4.0%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 43%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.NYSE:HTH Historic Dividend April 28th 2025

Check out our latest analysis for Hilltop Holdings

Hilltop Holdings Is Still Building Its Track Record

It is great to see that Hilltop Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from $0.24 total annually to $0.72. This means that it has been growing its distributions at 13% per annum over that time. 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.

Hilltop Holdings May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, Hilltop Holdings' earnings per share has shrunk at approximately 4.1% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Hilltop Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Story Continues

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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