Cardinal Health, Inc. (NYSE:CAH) Is A Real Dividend Rock Star - Here Is Why
Over the past 10 years Cardinal Health, Inc. (NYSE:CAH) has grown its dividend payouts from $0.56 to $1.92. With a market cap of US$13b, Cardinal Health pays out 42% of its earnings, leading to a 4.5% yield. Let me elaborate on you why the stock stands out for income investors like myself.
See our latest analysis for Cardinal Health
What Is A Dividend Rock Star?
It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically:
Its annual yield is among the top 25% of dividend payers
It has paid dividend every year without dramatically reducing payout in the past
Its has increased its dividend per share amount over the past
It is able to pay the current rate of dividends from its earnings
It has the ability to keep paying its dividends going forward
High Yield And Dependable
Cardinal Health currently yields 4.5%, which is high for Healthcare stocks. But the real reason Cardinal Health stands out is because it has a proven track record of continuously paying out this level of dividends, from earnings, to shareholders and can be expected to continue paying in the future. This is a highly desirable trait for a stock holding if you're investor who wants a robust cash inflow from your portfolio over a long period of time.
Reliability is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of CAH it has increased its DPS from $0.56 to $1.92 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
The company currently pays out 42% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 41% which, assuming the share price stays the same, leads to a dividend yield of 4.9%. Moreover, EPS is forecasted to fall to $3.24 in the upcoming year.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Next Steps:
With Cardinal Health producing strong dividend income for your portfolio over the past few years, you can take comfort in knowing that this stock will still continue to be a top dividend generator moving forward. However, given this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for CAH’s future growth? Take a look at our free research report of analyst consensus for CAH’s outlook.
Valuation: What is CAH worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CAH is currently mispriced by the market.
Other Dividend Rockstars: Are there strong dividend payers with better fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
