HLS Therapeutics (TSE:HLS) Is Paying Out A Dividend Of $0.05

The board of HLS Therapeutics Inc. (TSE:HLS) has announced that it will pay a dividend on the 15th of June, with investors receiving $0.05 per share. Based on this payment, the dividend yield will be 2.8%, which is fairly typical for the industry.

Check out our latest analysis for HLS Therapeutics

HLS Therapeutics Might Find It Hard To Continue The Dividend

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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. 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.

Analysts are expecting EPS to grow by 63.9% 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. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

HLS Therapeutics Doesn't Have A Long Payment History

HLS Therapeutics' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the dividend has gone from $0.151 total annually to $0.145. The dividend has shrunk at a rate of less than 1% a year over this period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. 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

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about HLS Therapeutics' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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 example, we've picked out 1 warning sign for HLS Therapeutics that investors should know about before committing capital to this stock. 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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