Unveiling Horizon Technology Finance Corp's Dividend Performance: A Deep Dive Analysis
Assessing the sustainability of Horizon Technology Finance Corp's dividend payments and growth
Horizon Technology Finance Corp (NASDAQ:HRZN) recently announced a dividend of $0.11 per share, payable on 2023-11-15, with the ex-dividend date set for 2023-10-17. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Horizon Technology Finance Corps dividend performance and assess its sustainability.
What Does Horizon Technology Finance Corp Do?
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Horizon Technology Finance Corp is a specialty finance company. Its investment objective is to maximize its investment portfolio's total return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. It lends to and invests in development-stage companies in the technology, life science, healthcare information and services and sustainability industries.
A Glimpse at Horizon Technology Finance Corp's Dividend History
Horizon Technology Finance Corp has maintained a consistent dividend payment record since 2010. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Horizon Technology Finance Corp's Dividend Yield and Growth
As of today, Horizon Technology Finance Corp currently has a 12-month trailing dividend yield of 10.62% and a 12-month forward dividend yield of 10.86%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Horizon Technology Finance Corp's annual dividend growth rate was 0.60%. Extended to a five-year horizon, this rate decreased to 0.20% per year. And over the past decade, Horizon Technology Finance Corp's annual dividends per share growth rate stands at -3.50%.
Based on Horizon Technology Finance Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Horizon Technology Finance Corp stock as of today is approximately 10.73%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Horizon Technology Finance Corp's dividend payout ratio is 2.25. This may suggest that the company's dividend may not be sustainable.
Horizon Technology Finance Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Horizon Technology Finance Corp's profitability 4 out of 10 as of 2023-06-30, suggesting the dividend may not be sustainable. The company has reported net profit in 9 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Horizon Technology Finance Corp's growth rank of 4 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Revenue is the lifeblood of any company, and Horizon Technology Finance Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Horizon Technology Finance Corp's revenue has increased by approximately -12.00% per year on average, a rate that underperforms than approximately 70.35% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Horizon Technology Finance Corp's earnings increased by approximately -16.00% per year on average, a rate that underperforms than approximately 71.95% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -1.70%, underperforms than approximately 72.04% of global competitors.
Next Steps
In conclusion, while Horizon Technology Finance Corp's dividend payments and growth rate may seem attractive, the company's payout ratio, profitability, and growth metrics suggest a potential risk for the sustainability of these dividends. Investors should conduct further analysis and consider these factors before making a decision. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
