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Heartland Financial USA's (NASDAQ:HTLF) Dividend Will Be Increased To US$0.27

The board of Heartland Financial USA, Inc. (NASDAQ:HTLF) has announced that it will be increasing its dividend on the 30th of November to US$0.27. This makes the dividend yield about the same as the industry average at 1.9%.

Check out our latest analysis for Heartland Financial USA

Heartland Financial USA's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Heartland Financial USA's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

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Looking forward, earnings per share is forecast to rise by 0.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

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Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from US$0.40 in 2011 to the most recent annual payment of US$1.00. This means that it has been growing its distributions at 9.6% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Heartland Financial USA Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see Heartland Financial USA has been growing its earnings per share at 8.2% a year over the past five years. Heartland Financial USA definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

The company has also been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like Heartland Financial USA's Dividend

Overall, a dividend increase is always good, and we think that Heartland Financial USA is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Heartland Financial USA that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

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