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Should Hansen Technologies Ltd (ASX:HSN) Be Part Of Your Dividend Portfolio?

A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Hansen Technologies Ltd (ASX:HSN) has been paying a dividend to shareholders. Today it yields 2.3%. Does Hansen Technologies tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

See our latest analysis for Hansen Technologies

5 checks you should do on a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

  • Is it paying an annual yield above 75% of dividend payers?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has the amount of dividend per share grown over the past?

  • Is is able to pay the current rate of dividends from its earnings?

  • Will the company be able to keep paying dividend based on the future earnings growth?

ASX:HSN Historical Dividend Yield September 19th 18
ASX:HSN Historical Dividend Yield September 19th 18

Does Hansen Technologies pass our checks?

Hansen Technologies has a trailing twelve-month payout ratio of 40.7%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32.7%, leading to a dividend yield of around 1.8%. In addition to this, EPS is also forecasted to fall to A$0.13 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.

When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Hansen Technologies generates a yield of 2.3%, which is high for Software stocks but still below the market’s top dividend payers.

Next Steps:

Considering the dividend attributes we analyzed above, Hansen Technologies is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental factors you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for HSN’s future growth? Take a look at our free research report of analyst consensus for HSN’s outlook.

  2. Valuation: What is HSN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HSN is currently mispriced by the market.

  3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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