High Dividend 50: Horizon Bancorp, Inc. – Sure Dividend

Revealed on July 1st, 2024 by Josh Arnold

Excessive-yield shares pay out dividends which are considerably greater than market common dividends. For instance, the S&P 500’s present yield is simply ~1.3%, a product of report highs in inventory indices to this point in 2024.

Excessive-yield shares may be very useful to shore up revenue after retirement. A $120,000 funding in shares with a mean dividend yield of 5% creates a mean of $500 a month in dividends.

We now have created a spreadsheet of shares (and intently associated REITs and MLPs, and so forth.) with dividend yields of 5% or extra…

You’ll be able to obtain your free full checklist of all excessive dividend shares with 5%+ yields (together with essential monetary metrics resembling dividend yield and payout ratio) by clicking on the hyperlink beneath:

Subsequent on our checklist of excessive dividend shares to evaluate is Horizon Bancorp, Inc. (HBNC).

Horizon has an eight-year dividend improve streak, which actually isn’t the longest streak, however the financial institution has been capable of put in some very robust dividend will increase in these eight years.

Enterprise Overview

Horizon is a financial institution holding firm for Horizon Financial institution, which engages within the typical combine of business and retail banking providers and merchandise.

It gives checking, saving, cash market, certificates of deposit, retirement accounts, varied varieties of shopper and industrial loans, insurance coverage, and extra.

Horizon operates in Indiana and Michigan, and was based in 1873.

Supply: Investor presentation

The financial institution reported first quarter earnings on April twenty fourth, 2024, and outcomes have been enormously improved from the prior quarter.

Supply: Investor presentation

Horizon noticed 32 cents in earnings-per-share, up from a lack of 58 cents within the fourth quarter of 2023. Credit score high quality stays glorious with simply 0.01% web charge-offs for the interval, and non-performing property totaled simply 26 foundation factors of complete property.

Web curiosity margin was up seven foundation factors, boosting profitability, however we word that’s a really low NIM determine in comparison with the remainder of our protection universe within the banking sector.

After Q1 outcomes, we estimate $1.32 in earnings-per-share for this yr.

Progress Prospects

Horizon’s earnings progress has been uneven to say the least. The financial institution has managed to spice up earnings over time, however prior to now decade, there have been three years of declining earnings, together with final yr.

We anticipate to see 8% progress from this yr’s base of $1.32, however we consider it is a reversion to the imply given the low base.

In different phrases, we don’t consider Horizon’s natural progress over the long-term is especially robust, however we’re on the lookout for a return to imply ranges nearer to $2 in earnings-per-share we’ve seen lately.

Supply: Investor presentation

If that is going to occur, Horizon is prone to depend on mortgage progress, which its been concentrating on in current quarters.

In Q1, the financial institution grew loans by $200 million, led by industrial mortgage progress, in addition to high-yield shopper loans. Whereas these are riskier, the nearly-11% yield is sort of engaging, notably for a financial institution with very low NIM like Horizon.

Aggressive Benefits & Recession Efficiency

Like different banks, Horizon actually doesn’t have any aggressive benefits. We word that every one banks typically provide the identical set of services and products, so small banks like Horizon depend on model loyalty and workplace location comfort for buyer retention. Nevertheless, we word that these are unfastened benefits at greatest, like different banks.

Additionally like different banks, Horizon is prone to recessionary durations, and we word that Horizon’s earnings are prone to endure through the subsequent interval of financial weak point.

To its credit score, the corporate carried out comparatively strongly through the earlier main financial downturn, the Nice Recession of 2008-2009:

2008 earnings-per-share: $0.54
2009 earnings-per-share: $0.47
2010 earnings-per-share: $0.54

Horizon’s glorious credit score high quality will serve it nicely through the subsequent recession, however the truth stays that no financial institution has management over mortgage demand throughout recessions, or certainly debtors which are unable to pay.

With Horizon struggling lately to develop earnings throughout what has been a really robust interval of financial progress, we’re cautious for the financial institution through the subsequent recession.

Dividend Evaluation

Horizon has managed to spice up its dividend by a mean of just about 11% yearly prior to now decade, which is extraordinarily robust by the requirements of the banking group.

Horizon’s dividend payout ratio was fairly low a decade in the past at a couple of quarter of earnings, however is double that now.

The present dividend of 64 cents per share yearly is correct at half of earnings, so we consider it’s protected for the foreseeable future. We do suppose that the power for Horizon to boost the dividend is considerably restricted, but additionally consider small will increase are within the playing cards within the coming years.

The yield could be very robust at 5.2%, the product of that robust dividend progress, but additionally a comparatively stagnant share worth. Total, we just like the yield and the relative security of the payout, however see the chance for big will increase to be muted.

Closing Ideas

We see Horizon as a robust revenue inventory, and one with a comparatively protected dividend and area for small will increase going ahead. We word the dearth of aggressive benefits and recession susceptibility, however the latter isn’t a difficulty for the second.

We encourage buyers to observe web curiosity margin, as that’s a weak level for Horizon in the mean time by way of earnings, which clearly has a direct affect on its capacity to boost the dividend.

In case you are keen on discovering high-quality dividend progress shares and/or different high-yield securities and revenue securities, the next Certain Dividend assets shall be helpful:

Excessive-Yield Particular person Safety Analysis

Different Certain Dividend Assets