Why Home Bancorp (HBCP) is a Strong Dividend Growth Play for Income Investors

For income investors navigating a rising interest rate environment, identifying stocks that balance sustainable dividend growth with earnings resilience is critical. Home Bancorp (HBCP) emerges as a compelling candidate, offering a 2.05% yield [1] and a track record of compounding shareholder value through disciplined capital allocation and net interest margin (NIM) expansion. This analysis explores how HBCP’s strategic positioning in the Southeastern U.S. banking sector, coupled with its ability to adapt to rate hikes, makes it a standout for long-term income-focused portfolios.

A Track Record of Dividend Resilience

Home Bancorp has demonstrated remarkable consistency in rewarding shareholders. Over the past five years, the company has raised its dividend five times, with the most recent increase of 7% in August 2025 [1]. This 7% hike, the largest in its recent history, reflects confidence in the company’s ability to sustain payouts even as interest rates climb. The current annualized dividend of $1.16 per share [1]—paid quarterly—positions HBCP as a reliable income source, particularly for investors seeking alternatives to the historically low yields in bonds and CDs.

The sustainability of this payout is further supported by HBCP’s earnings trajectory. While net income dipped slightly in 2024 to $36.43 million [2], the company rebounded in 2025 with a 39.53% year-on-year increase in Q2 net income to $11.3 million [2]. This momentum, combined with a trailing twelve-month growth rate of 13.57% [2], suggests that HBCP is not only stabilizing but accelerating its profitability.

Historical backtesting of HBCP’s dividend announcements from 2022 to 2025 reveals mixed signals. Only two dividend announcements fell within this timeframe, limiting statistical power. While average cumulative returns trended mildly negative, with statistically significant underperformance noted on Day-4 and Day-11 relative to the benchmark, these results appear inconsistent and indistinguishable from noise for most of the period. This suggests no persistent alpha generation around HBCP’s dividend announcements historically, though the recent 7% increase in August 2025 aligns with management’s confidence in earnings resilience and capital returns.

NIM Expansion: A Tailwind in Rising Rates

A key driver of HBCP’s earnings strength is its expanding net interest margin. In Q1 2025, the NIM reached 3.91% [3], climbing to 4.04% by Q2 2025 [3]. This 13-basis-point increase over two quarters is significant, as it outpaces the typical lag in banking sector NIM adjustments during rate hikes. Management attributes this growth to “stable funding costs and higher earning asset yields” [3], a testament to HBCP’s agility in managing its loan and deposit portfolios.

The company’s NIM expansion is particularly noteworthy in a rising rate environment. Unlike larger banks burdened by legacy liabilities, HBCP’s regional focus allows it to price loans and deposits more dynamically. For instance, its 11-basis-point NIM increase in Q4 2024 [4]—driven by lower funding costs and loan growth—illustrates its ability to capitalize on rate cycles. This adaptability ensures that HBCP’s earnings base remains robust, providing a durable foundation for future dividend hikes.

Strategic Positioning for Long-Term Growth

HBCP’s focus on the Southeastern U.S. market—a region experiencing strong economic growth and demographic expansion—further bolsters its long-term potential. The company’s disciplined approach to loan growth, coupled with its cost-efficient operations, positions it to outperform peers in both rate-sensitive and rate-insensitive environments. Additionally, its recent share repurchase plan [2] signals management’s confidence in undervaluation, which could enhance earnings per share and support dividend sustainability.

Conclusion

Home Bancorp’s combination of a rising dividend, expanding NIM, and strategic regional focus makes it a rare gem for income investors. While rising rates often pressure bank valuations, HBCP’s proactive management and operational flexibility position it to thrive. For those seeking a dividend growth play with earnings momentum, HBCP offers a compelling case—provided they monitor macroeconomic risks and the company’s balance sheet health.

Source:
[1] Home Bancorp, Inc. Common Stock (HBCP) Dividend History [https://www.nasdaq.com/market-activity/stocks/hbcp/dividend-history]
[2] Home Bancorp Inc Net Income Growth Rates (HBCP) [https://csimarket.com/stocks/single_growth_rates.php?code=HBCP&net]
[3] Earnings call transcript: Home Bancorp Q1 2025 [https://www.investing.com/news/transcripts/earnings-call-transcript-home-bancorp-q1-2025-earnings-beat-expectations-93CH-3996543]
[4] HOME BANCORP ANNOUNCES 2024 FOURTH QUARTER RESULTS [https://home24bank.investorroom.com/2025-01-27-HOME-BANCORP-ANNOUNCES-2024-FOURTH-QUARTER-RESULTS-AND-INCREASES-QUARTERLY-DIVIDEND-BY-4]