Hilltop Holdings Inc. (NYSE:HTH) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Hilltop Holdings' shares before the 10th of November in order to be eligible for the dividend, which will be paid on the 28th of November.

The company's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Calculating the last year's worth of payments shows that Hilltop Holdings has a trailing yield of 2.1% on the current share price of $29.87. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hilltop Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Hilltop Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Hilltop Holdings's payout ratio is modest, at just 38% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Hilltop Holdings, with earnings per share up 3.7% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hilltop Holdings has delivered an average of 15% per year annual increase in its dividend, based on the past seven years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.