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Hercules Capital Inc's Dividend Analysis

Assessing the Sustainability of Hercules Capital Inc's Upcoming Dividend

Hercules Capital Inc (NYSE:HTGC) recently announced a dividend of $0.48 per share, payable on 2024-03-06, with the ex-dividend date set for 2024-02-27. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Hercules Capital Inc's dividend performance and assess its sustainability.

What Does Hercules Capital Inc Do?

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Hercules Capital Inc is a specialty finance company engaged in providing senior secured loans to high-growth, venture capital-backed companies in a variety of technology, life sciences, and sustainable and renewable technology industries. It invests majorly in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The company lends to and invests in portfolio companies in various technology-related industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and sustainable and renewable technology.

Hercules Capital Inc's Dividend Analysis
Hercules Capital Inc's Dividend Analysis

A Glimpse at Hercules Capital Inc's Dividend History

Hercules Capital Inc has maintained a consistent dividend payment record since 2005. Dividends are currently distributed on a quarterly basis. Hercules Capital Inc has increased its dividend each year since 2010. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 14 years.

Below is a chart showing annual Dividends Per Share for tracking historical trends.

Breaking Down Hercules Capital Inc's Dividend Yield and Growth

As of today, Hercules Capital Inc currently has a 12-month trailing dividend yield of 9.77% and a 12-month forward dividend yield of 10.31%. This suggests an expectation of increased dividend payments over the next 12 months.

Over the past three years, Hercules Capital Inc's annual dividend growth rate was 12.40%. Extended to a five-year horizon, this rate decreased to 7.30% per year. And over the past decade, Hercules Capital Inc's annual dividends per share growth rate stands at 3.20%.

Based on Hercules Capital Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Hercules Capital Inc stock as of today is approximately 13.90%.

Hercules Capital Inc's Dividend Analysis
Hercules Capital Inc's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Hercules Capital Inc's dividend payout ratio is 0.79, which may suggest that the company's dividend may not be sustainable.

Hercules Capital Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Hercules Capital Inc's profitability 5 out of 10 as of 2023-12-31, suggesting fair profitability. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. Hercules Capital Inc's growth rank of 5 out of 10 suggests that the company has a fair growth outlook.

Revenue is the lifeblood of any company, and Hercules Capital Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Hercules Capital Inc's revenue has increased by approximately 3.60% per year on average, a rate that underperforms approximately 53.34% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Hercules Capital Inc's earnings increased by approximately 4.70% per year on average, a rate that underperforms approximately 54.18% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of 7.40%, which underperforms approximately 47.19% of global competitors.

Next Steps

Considering Hercules Capital Inc's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should weigh the high yield against the potential risks associated with the sustainability of these payments. The company's consistent history of dividend payments and a high yield on cost are attractive, yet the payout ratio and comparative underperformance in growth metrics suggest caution. Investors should monitor Hercules Capital Inc's future earnings reports and industry trends closely to make informed decisions about this dividend-paying stock.

GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.