The board of Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) has announced that it will be increasing its dividend by 3.8% on the 18th of August to $0.135, up from last year's comparable payment of $0.13. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

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Home Federal Bancorp of Louisiana's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Home Federal Bancorp of Louisiana has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Home Federal Bancorp of Louisiana's payout ratio of 47% is a good sign as this means that earnings decently cover dividends.

EPS is set to fall by 0.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio could be 54%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Home Federal Bancorp of Louisiana

Home Federal Bancorp of Louisiana Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.14, compared to the most recent full-year payment of $0.52. This means that it has been growing its distributions at 14% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Home Federal Bancorp of Louisiana's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Home Federal Bancorp of Louisiana you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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