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

HLS Therapeutics Inc. (TSE:HLS) will pay a dividend of $0.05 on the 15th of March. Based on this payment, the dividend yield will be 2.1%, which is fairly typical for the industry.

Check out the opportunities and risks within the CA Pharmaceuticals industry.

HLS Therapeutics' Distributions May Be Difficult To Sustain

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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.

Over the next year, EPS is forecast to rise by 68.5%. 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 Is Still Building Its Track Record

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 an annual total of $0.151 in 2018 to the most recent total annual payment of $0.147. Payments have been decreasing at a very slow pace in this time period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. 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.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for HLS Therapeutics that investors need to be conscious of moving forward. 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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