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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hansard Global Plc (LON:HSD) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 11th of March in order to be eligible for this dividend, which will be paid on the 20th of April.
Hansard Global's next dividend payment will be UK£0.018 per share, on the back of last year when the company paid a total of UK£0.044 to shareholders. Calculating the last year's worth of payments shows that Hansard Global has a trailing yield of 9.4% on the current share price of £0.472. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Hansard Global has been able to grow its dividends, or if the dividend might be cut.
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. Hansard Global distributed an unsustainably high 132% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Hansard Global's earnings per share have dropped 21% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hansard Global has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
The Bottom Line
Should investors buy Hansard Global for the upcoming dividend? Earnings per share are in decline and Hansard Global is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that in mind though, if the poor dividend characteristics of Hansard Global don't faze you, it's worth being mindful of the risks involved with this business. In terms of investment risks, we've identified 3 warning signs with Hansard Global and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top 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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