Hennessy Advisors (NASDAQ:HNNA) Is Paying Out A Dividend Of $0.1375

Hennessy Advisors, Inc. (NASDAQ:HNNA) has announced that it will pay a dividend of $0.1375 per share on the 31st of August. This makes the dividend yield 5.5%, which will augment investor returns quite nicely.

View our latest analysis for Hennessy Advisors

Hennessy Advisors' Earnings Easily Cover The Distributions

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 means that a large portion of its earnings are being retained to grow the business.

Looking forward, could fall by 14.3% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 83% in the next 12 months which is on the higher end of the range we would say is sustainable.

Hennessy Advisors Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from $0.0668 total annually to $0.55. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year 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

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Earnings per share has been sinking by 14% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Hennessy Advisors' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen 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. Just as an example, we've come across 2 warning signs for Hennessy Advisors you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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