HLS Therapeutics (TSE:HLS) Has Affirmed Its Dividend Of CA$0.05

HLS Therapeutics Inc. (TSE:HLS) has announced that it will pay a dividend of CA$0.05 per share on the 15th of June. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

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. HLS Therapeutics is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Analysts are expecting EPS to grow by 93.9% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. 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 dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. Since 2018, the first annual payment was US$0.15, compared to the most recent full-year payment of US$0.16. This works out to be a compound annual growth rate (CAGR) of approximately 1.2% a year over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Although it's important to note that HLS Therapeutics' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

HLS Therapeutics' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 5 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.