HLS Therapeutics (TSE:HLS) Has Announced A Dividend Of CA$0.05

HLS Therapeutics Inc. (TSE:HLS) will pay a dividend of CA$0.05 on the 15th of September. The dividend yield is 1.6% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for HLS Therapeutics

HLS Therapeutics Might Find It Hard To Continue The Dividend

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. HLS Therapeutics is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS could expand by 1.1% if recent trends continue. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

HLS Therapeutics Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. 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. 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.

HLS Therapeutics May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. 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. With no profits, we don't think HLS Therapeutics has much potential to grow the dividend in the future.

In Summary

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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for HLS Therapeutics that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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