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Is HLS Therapeutics Inc. (TSE:HLS) An Attractive Dividend Stock?

A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. HLS Therapeutics Inc. (TSE:HLS) has started paying a dividend to shareholders. It currently trades on a yield of 1.3%. Does HLS Therapeutics tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.

View our latest analysis for HLS Therapeutics

5 checks you should use to assess a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Is their annual yield among the top 25% of dividend payers?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Is is able to pay the current rate of dividends from its earnings?

  • Will it be able to continue to payout at the current rate in the future?

TSX:HLS Historical Dividend Yield, March 15th 2019
TSX:HLS Historical Dividend Yield, March 15th 2019

Does HLS Therapeutics pass our checks?

HLS Therapeutics has a negative payout ratio, which is usually not ideal.

If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view HLS Therapeutics as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record.

Relative to peers, HLS Therapeutics generates a yield of 1.3%, which is on the low-side for Healthcare stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in HLS Therapeutics for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three pertinent factors you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for HLS’s future growth? Take a look at our free research report of analyst consensus for HLS’s outlook.

  2. Valuation: What is HLS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HLS is currently mispriced by the market.

  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.