Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that U.S. Physical Therapy, Inc. (NYSE:USPH) is about to go ex-dividend in just 4 days. You can purchase shares before the 14th of August in order to receive the dividend, which the company will pay on the 13th of September.
U.S. Physical Therapy's next dividend payment will be US$0.30 per share, and in the last 12 months, the company paid a total of US$1.08 per share. Based on the last year's worth of payments, U.S. Physical Therapy has a trailing yield of 0.9% on the current stock price of $133.84. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether U.S. Physical Therapy has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. U.S. Physical Therapy paid out 67% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether U.S. Physical Therapy generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.
It's positive to see that U.S. Physical Therapy's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that U.S. Physical Therapy's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. U.S. Physical Therapy has delivered an average of 18% per year annual increase in its dividend, based on the past 8 years of dividend payments.
To Sum It Up
Is U.S. Physical Therapy worth buying for its dividend? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, U.S. Physical Therapy doesn't stand out from a dividend perspective. In summary, while it has some positive characteristics, we're not inclined to race out and buy U.S. Physical Therapy today.
Curious what other investors think of U.S. Physical Therapy? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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