In This Article:
HLS Therapeutics Inc.'s (TSE:HLS) investors are due to receive a payment of CA$0.05 per share on 15th of March. This means the annual payment will be 1.2% of the current stock price, which is lower than the industry average.
See our latest analysis for HLS Therapeutics
HLS Therapeutics Might Find It Hard To Continue The Dividend
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While HLS Therapeutics is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Recent, EPS has fallen by 2.8%, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.
HLS Therapeutics Doesn't Have A Long Payment History
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The first annual payment during the last 3 years was US$0.15 in 2018, and the most recent fiscal year payment was US$0.16. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
HLS Therapeutics May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. It's not great to see that HLS Therapeutics' earnings per share has fallen at approximately 2.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
HLS Therapeutics' Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think HLS Therapeutics is a great stock to add to your portfolio if income is your focus.