HLS Therapeutics' (TSE:HLS) Dividend Will Be CA$0.05

The board of HLS Therapeutics Inc. (TSE:HLS) has announced that it will pay a dividend on the 15th of September, with investors receiving CA$0.05 per share. This payment means the dividend yield will be 1.5%, which is below the average for the industry.

See our latest analysis for HLS Therapeutics

HLS Therapeutics Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Analysts are expecting EPS to grow by 68.1% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

HLS Therapeutics Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from US$0.15 in 2018 to the most recent annual payment of US$0.15. Dividend payments have been growing, but very slowly over the period. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. However, HLS Therapeutics' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

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. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 5 analysts are forecasting a turnaround in our free collection of analyst estimates here. Is HLS Therapeutics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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