Hennessy Advisors, Inc. (NASDAQ:HNNA) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 10th of November will not receive the dividend, which will be paid on the 2nd of December.
Hennessy Advisors's next dividend payment will be US$0.14 per share, on the back of last year when the company paid a total of US$0.55 to shareholders. Looking at the last 12 months of distributions, Hennessy Advisors has a trailing yield of approximately 6.6% on its current stock price of $8.28. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Hennessy Advisors's payout ratio is modest, at just 46% of profit.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Hennessy Advisors earnings per share are up 6.3% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Hennessy Advisors has lifted its dividend by approximately 25% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Hennessy Advisors an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Hennessy Advisors more closely.
On that note, you'll want to research what risks Hennessy Advisors is facing. To that end, you should learn about the 2 warning signs we've spotted with Hennessy Advisors (including 1 which doesn't sit too well with us).
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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