HomeStreet (NASDAQ:HMST) Is Due To Pay A Dividend Of $0.35

HomeStreet, Inc. (NASDAQ:HMST) will pay a dividend of $0.35 on the 22nd of February. The dividend yield will be 4.8% based on this payment which is still above the industry average.

View our latest analysis for HomeStreet

HomeStreet's Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

HomeStreet has a short history of paying out dividends, with its current track record at only 3 years. Diving into the company's earnings report, the payout ratio is set at 40%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

EPS is set to fall by 23.4% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 48% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

HomeStreet Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2020, the dividend has gone from $0.60 total annually to $1.40. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year over that time. HomeStreet has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that HomeStreet has grown earnings per share at 17% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for HomeStreet's prospects of growing its dividend payments in the future.

We Really Like HomeStreet's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for HomeStreet (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here