Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Home Federal Bancorp of Louisiana's shares before the 26th of April in order to be eligible for the dividend, which will be paid on the 13th of May.

The company's next dividend payment will be US$0.125 per share, and in the last 12 months, the company paid a total of US$0.50 per share. Looking at the last 12 months of distributions, Home Federal Bancorp of Louisiana has a trailing yield of approximately 4.3% on its current stock price of US$11.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Home Federal Bancorp of Louisiana's payout ratio is modest, at just 32% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Home Federal Bancorp of Louisiana paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Home Federal Bancorp of Louisiana earnings per share are up 8.7% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Home Federal Bancorp of Louisiana has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Home Federal Bancorp of Louisiana worth buying for its dividend? Home Federal Bancorp of Louisiana has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, Home Federal Bancorp of Louisiana looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Home Federal Bancorp of Louisiana has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Home Federal Bancorp of Louisiana that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.