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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 Hamilton Lane Incorporated (NASDAQ:HLNE) is about to go ex-dividend in just four days. You can purchase shares before the 14th of December in order to receive the dividend, which the company will pay on the 7th of January.
Hamilton Lane's next dividend payment will be US$0.31 per share. Last year, in total, the company distributed US$1.25 to shareholders. Looking at the last 12 months of distributions, Hamilton Lane has a trailing yield of approximately 1.7% on its current stock price of $72.89. If you buy this business for its dividend, you should have an idea of whether Hamilton Lane's dividend is reliable and sustainable. As a result, readers should always check whether Hamilton Lane 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. Hamilton Lane is paying out an acceptable 60% of its profit, a common payout level among most companies.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Hamilton Lane has grown its earnings rapidly, up 284% a year for the past five years.
Hamilton Lane also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hamilton Lane has delivered an average of 21% per year annual increase in its dividend, based on the past three years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
From a dividend perspective, should investors buy or avoid Hamilton Lane? Hamilton Lane has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Hamilton Lane ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
In light of that, while Hamilton Lane has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Hamilton Lane that you should be aware of before investing in their shares.
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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