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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 4 days. This means that investors who purchase shares on or after the 14th of September will not receive the dividend, which will be paid on the 6th of October.
Hamilton Lane's upcoming dividend is US$0.31 a share, following on from the last 12 months, when the company distributed a total of US$1.25 per share to shareholders. Calculating the last year's worth of payments shows that Hamilton Lane has a trailing yield of 1.9% on the current share price of $65.63. 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! 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 typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hamilton Lane paid out more than half (63%) of its earnings last year, which is a regular payout ratio for most companies.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Hamilton Lane's earnings have been skyrocketing, up 275% per annum 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. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid Hamilton Lane? Earnings per share are growing at an attractive rate, and Hamilton Lane is paying out a bit over half its profits. Overall, Hamilton Lane looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
While it's tempting to invest in Hamilton Lane for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Hamilton Lane and you should be aware of it before buying any shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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