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

The board of Hennessy Advisors, Inc. (NASDAQ:HNNA) has announced that it will pay a dividend on the 6th of March, with investors receiving $0.1375 per share. This means the annual payment is 4.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Hennessy Advisors

Hennessy Advisors' Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Hennessy Advisors' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Unless the company can turn things around, EPS could fall by 4.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 58%, which is definitely feasible to continue.

Hennessy Advisors Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was $0.107, compared to the most recent full-year payment of $0.56. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. It's not great to see that Hennessy Advisors' earnings per share has fallen at approximately 4.1% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, we think Hennessy Advisors is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Hennessy Advisors (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.