Here’s Why We’re Wary Of Buying Hansard Global’s (LON:HSD) For Its Upcoming Dividend

Readers hoping to buy Hansard Global plc (LON:HSD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company’s books on the record date. In other words, investors can purchase Hansard Global’s shares before the 2nd of October in order to be eligible for the dividend, which will be paid on the 13th of November.

The company’s next dividend payment will be UK£0.0265 per share. Last year, in total, the company distributed UK£0.044 to shareholders. Calculating the last year’s worth of payments shows that Hansard Global has a trailing yield of 9.1% on the current share price of UK£0.491. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! As a result, readers should always check whether Hansard Global has been able to grow its dividends, or if the dividend might be cut.

We’ve found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hansard Global paid out a disturbingly high 340% of its profit as dividends last year, which makes us concerned there’s something we don’t fully understand in the business.

When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.

See our latest analysis for Hansard Global

Click here to see how much of its profit Hansard Global paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we’re concerned to see Hansard Global’s earnings per share have dropped 17% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Hansard Global’s dividend payments per share have declined at 6.5% per year on average over the past 10 years, which is uninspiring. It’s never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company’s health in an attempt to maintain it.

To Sum It Up

Has Hansard Global got what it takes to maintain its dividend payments? Not only are earnings per share shrinking, but Hansard Global is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. All things considered, we’re not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you’re still interested in Hansard Global despite it’s poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Hansard Global is showing 4 warning signs in our investment analysis, and 1 of those is concerning…

If you’re in the market for strong dividend payers, we recommend checking 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.