Yahoo Finance Cardinal Health (NYSE:CAH) Has Announced That It Will Be Increasing Its Dividend To $0.5056
The board of Cardinal Health, Inc. (NYSE:CAH) has announced that it will be paying its dividend of $0.5056 on the 15th of July, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.0%, providing a nice boost to shareholder returns.
Check out our latest analysis for Cardinal Health
Cardinal Health's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Cardinal Health was paying out 90% of earnings, but a comparatively small 25% of free cash flows. This leaves plenty of cash for reinvestment into the business.
According to analysts, EPS should be several times higher next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 27% which is fairly sustainable.
Cardinal Health Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $1.21 in 2014, and the most recent fiscal year payment was $2.02. This implies that the company grew its distributions at a yearly rate of about 5.3% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Cardinal Health's Dividend Might Lack Growth
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Cardinal Health has been growing its earnings per share at 196% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Cardinal Health is not retaining those earnings to reinvest in growth.
Our Thoughts On Cardinal Health's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look pretty sustainable with good earnings coverage and a reasonable track record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Cardinal Health that you should be aware of before investing. Is Cardinal Health 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.
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