Stock Analysis

Hansen Technologies Limited (ASX:HSN) Will Pay A AU$0.07 Dividend In Two Days

  •  Updated
ASX:HSN
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Readers hoping to buy Hansen Technologies Limited (ASX:HSN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 2nd of September, you won't be eligible to receive this dividend, when it is paid on the 25th of September.

The upcoming dividend for Hansen Technologies will put a total of AU$0.07 per share in shareholders' pockets, up from last year's total dividends of AU$0.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See 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 (74%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Hansen Technologies generated enough free cash flow to afford its dividend. Fortunately, it paid out only 43% of its free cash flow in the past year.

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 August 30th 2020

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Hansen Technologies's earnings per share have been shrinking at 2.5% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Hansen Technologies has lifted its dividend by approximately 1.8% a year on average.

To Sum It Up

Is Hansen Technologies worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you're not too concerned about Hansen Technologies's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Every company has risks, and we've spotted 3 warning signs for Hansen Technologies you should know about.

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.

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