Stock Analysis

Hansen Technologies Limited (ASX:HSN) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

  •  Updated
ASX:HSN
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hansen Technologies Limited (ASX:HSN) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 3rd of March in order to receive the dividend, which the company will pay on the 25th of March.

Hansen Technologies's next dividend payment will be AU$0.05 per share, and in the last 12 months, the company paid a total of AU$0.10 per share. Last year's total dividend payments show that Hansen Technologies has a trailing yield of 2.4% on the current share price of A$4.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hansen Technologies can afford its dividend, and if the dividend could grow.

View our latest analysis for Hansen Technologies

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Hansen Technologies paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 20% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Hansen Technologies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
ASX:HSN Historic Dividend February 28th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Hansen Technologies's earnings per share have been growing at 14% a year for the past five years. Hansen Technologies has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hansen Technologies has delivered 7.2% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Hansen Technologies for the upcoming dividend? We like Hansen Technologies's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

So while Hansen Technologies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Hansen Technologies you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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