Hennessy Advisors (NASDAQ:HNNA) Is Due To Pay A Dividend Of $0.1375
Hennessy Advisors, Inc. (NASDAQ:HNNA) will pay a dividend of $0.1375 on the 6th of September. Based on this payment, the dividend yield on the company's stock will be 7.8%, which is an attractive boost to shareholder returns.
See our latest analysis for Hennessy Advisors
Hennessy Advisors Doesn't Earn Enough To Cover Its Payments
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Hennessy Advisors' dividend made up quite a large proportion of earnings but only 66% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Looking forward, EPS could fall by 24.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 136%, which could put the dividend in jeopardy if the company's earnings don't improve.
Hennessy Advisors Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.0832 in 2013 to the most recent total annual payment of $0.55. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Hennessy Advisors' EPS has fallen by approximately 25% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Our Thoughts On Hennessy Advisors' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Hennessy Advisors (of which 1 is significant!) you should know about. Is Hennessy Advisors not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
