Should You Buy Hilltop Holdings Inc. (NYSE:HTH) For Its Dividend?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. In the last few years Hilltop Holdings Inc. (NYSE:HTH) has paid a dividend to shareholders. Today it yields 1.7%. Does Hilltop Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

Check out our latest analysis for Hilltop Holdings

Here’s how I find good dividend stocks

If you are a dividend investor, you should always assess these five key metrics:

• Is it the top 25% annual dividend yield payer?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has the amount of dividend per share grown over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will it have the ability to keep paying its dividends going forward?

Does Hilltop Holdings pass our checks?

The company currently pays out 22% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect HTH’s payout to remain around the same level at 21% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.7%. Moreover, EPS should increase to $1.49.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. The reality is that it is too early to consider Hilltop Holdings as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, Hilltop Holdings has a yield of 1.7%, which is on the low-side for Banks stocks.

Next Steps:

If you are building an income portfolio, then Hilltop Holdings is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for HTH’s future growth? Take a look at our free research report of analyst consensus for HTH’s outlook.

2. Valuation: What is HTH worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HTH is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.