Yahoo Finance HCA Healthcare (NYSE:HCA) Will Pay A Larger Dividend Than Last Year At $0.60
HCA Healthcare, Inc.'s (NYSE:HCA) dividend will be increasing from last year's payment of the same period to $0.60 on 31st of March. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.
See our latest analysis for HCA Healthcare
HCA Healthcare's Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, HCA Healthcare's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 13.6% over the next year. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.
HCA Healthcare's Dividend Has Lacked Consistency
It's comforting to see that HCA Healthcare has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 5 years was $1.40 in 2018, and the most recent fiscal year payment was $2.40. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. HCA Healthcare has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. HCA Healthcare has seen EPS rising for the last five years, at 27% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
HCA Healthcare Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. To that end, HCA Healthcare has 3 warning signs (and 1 which is a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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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