Hennessy Advisors (NASDAQ:HNNA) Is Due To Pay A Dividend Of $0.1375

Hennessy Advisors, Inc. (NASDAQ:HNNA) will pay a dividend of $0.1375 on the 27th of November. Based on this payment, the dividend yield on the company's stock will be 8.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Hennessy Advisors

Hennessy Advisors Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 87% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 24.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 135%, which is definitely a bit high to be sustainable going forward.

Hennessy Advisors Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.0833 total annually to $0.55. This means that it has been growing its distributions at 21% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Earnings per share has been sinking by 25% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Hennessy Advisors' Dividend

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 company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 3 warning signs for Hennessy Advisors you should be aware of, and 1 of them doesn't sit too well with us. Is Hennessy Advisors not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.