Hennessy Advisors (NASDAQ:HNNA) Has Re-Affirmed Its Dividend Of US$0.14

Hennessy Advisors, Inc. (NASDAQ:HNNA) will pay a dividend of US$0.14 on the 2nd of September. Based on this payment, the dividend yield on the company's stock will be 5.5%, which is an attractive boost to shareholder returns.

View our latest analysis for Hennessy Advisors

Hennessy Advisors' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Hennessy Advisors' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, could fall by 11.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 76%, which is definitely on the higher side.

Hennessy Advisors Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.06 in 2011, and the most recent fiscal year payment was US$0.55. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

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. Hennessy Advisors' EPS has fallen by approximately 11% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Hennessy Advisors' Dividend

Overall, we think Hennessy Advisors is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Hennessy Advisors (of which 1 is a bit concerning!) you should know about. We have also put together a list of global stocks with a solid dividend.

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