Hawthorn Bancshares, Inc. (NASDAQ:HWBK) has announced that it will be increasing its periodic dividend on the 1st of July to $0.20, which will be 5.3% higher than last year's comparable payment amount of $0.19. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Hawthorn Bancshares. Read for free now.

Hawthorn Bancshares' Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Hawthorn Bancshares has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, Hawthorn Bancshares' latest earnings report puts its payout ratio at 21%, showing that the company can pay out its dividends comfortably.

If the trend of the last few years continues, EPS will grow by 10.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 30% by next year, which is in a pretty sustainable range.

See our latest analysis for Hawthorn Bancshares

Hawthorn Bancshares Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.135 in 2015 to the most recent total annual payment of $0.76. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Hawthorn Bancshares has impressed us by growing EPS at 10% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Hawthorn Bancshares' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Hawthorn Bancshares that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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