It looks like Hansard Global plc (LON:HSD) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Hansard Global's shares on or after the 30th of September, you won't be eligible to receive the dividend, when it is paid on the 11th of November.
The company's next dividend payment will be UK£0.026 per share. Last year, in total, the company distributed UK£0.044 to shareholders. Looking at the last 12 months of distributions, Hansard Global has a trailing yield of approximately 8.2% on its current stock price of £0.54. If you buy this business for its dividend, you should have an idea of whether Hansard Global's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hansard Global distributed an unsustainably high 125% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Hansard Global's earnings per share have dropped 10.0% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hansard Global has seen its dividend decline 11% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Has Hansard Global got what it takes to maintain its dividend payments? Not only are earnings per share shrinking, but Hansard Global is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. Hansard Global doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that being said, if you're still considering Hansard Global as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that Hansard Global is showing 4 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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