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Horizon Bancorp (HBNC) is a Top Dividend Stock Right Now: Should You Buy?

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

Horizon Bancorp in Focus

Based in Michigan City, Horizon Bancorp (HBNC - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of 15.57%. The bank holding company is currently shelling out a dividend of $0.13 per share, with a dividend yield of 2.84%. This compares to the Banks - Northeast industry's yield of 1.92% and the S&P 500's yield of 1.29%.

Looking at dividend growth, the company's current annualized dividend of $0.52 is up 8.3% from last year. In the past five-year period, Horizon Bancorp has increased its dividend 5 times on a year-over-year basis for an average annual increase of 15.96%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Horizon Bancorp's payout ratio is 30%, which means it paid out 30% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for HBNC for this fiscal year. The Zacks Consensus Estimate for 2021 is $1.78 per share, with earnings expected to increase 16.34% from the year ago period.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that HBNC is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).


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