Assessing the Sustainability of Tekla Healthcare Opportunities Fund's Upcoming Dividend
Tekla Healthcare Opportunities Fund (THQ, Financial) recently announced a dividend of $0.11 per share, payable on 2024-01-31, with the ex-dividend date set for 2024-01-23. 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 Tekla Healthcare Opportunities Fund's dividend performance and assess its sustainability.
What Does Tekla Healthcare Opportunities Fund Do?
Tekla Healthcare Opportunities Fund is a non-diversified closed-end fund in the United States. The fund's investment objective is to seek current income and long-term capital appreciation through investments in U.S. and non-U.S. companies in the healthcare industry (including equity securities, debt securities, and pooled investment vehicles). The fund invests in securities of public and private companies.
A Glimpse at Tekla Healthcare Opportunities Fund's Dividend History
Tekla Healthcare Opportunities Fund has maintained a consistent dividend payment record since 2014. Dividends are currently distributed on a monthly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Tekla Healthcare Opportunities Fund's Dividend Yield and Growth
As of today, Tekla Healthcare Opportunities Fund currently has a 12-month trailing dividend yield of 7.24% and a 12-month forward dividend yield of 7.24%. This suggests an expectation of the same dividend payments over the next 12 months.
Based on Tekla Healthcare Opportunities Fund's dividend yield and five-year growth rate, the 5-year yield on cost of Tekla Healthcare Opportunities Fund stock as of today is approximately 7.24%.
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 2023-09-30, Tekla Healthcare Opportunities Fund's dividend payout ratio is 1.05, which may suggest that the company's dividend may not be sustainable.
Tekla Healthcare Opportunities Fund's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Tekla Healthcare Opportunities Fund's profitability 3 out of 10 as of 2023-09-30, suggesting the dividend may not be sustainable. The company has reported net profit in 5 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Tekla Healthcare Opportunities Fund's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable. Revenue is the lifeblood of any company, and Tekla Healthcare Opportunities Fund's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Tekla Healthcare Opportunities Fund's revenue has decreased by approximately -22.60% per year on average, a rate that underperforms approximately 80.95% 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, Tekla Healthcare Opportunities Fund's earnings decreased by approximately -23.10% per year on average, a rate that underperforms approximately 77.95% of global competitors.
Next Steps
Considering Tekla Healthcare Opportunities Fund's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should approach with caution. The current figures raise concerns about the long-term sustainability of the dividend. As such, value investors may need to closely monitor the fund's financial health and industry trends before making investment decisions. Will Tekla Healthcare Opportunities Fund manage to overcome its growth challenges, or will investors need to look elsewhere for dividend stability? GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener to explore more opportunities.
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.
