Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HCA Healthcare, Inc. (NYSE:HCA) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 28th of February to receive the dividend, which will be paid on the 31st of March.
HCA Healthcare's next dividend payment will be US$0.43 per share, on the back of last year when the company paid a total of US$1.72 to shareholders. Last year's total dividend payments show that HCA Healthcare has a trailing yield of 1.2% on the current share price of $148. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether HCA Healthcare 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. HCA Healthcare has a low and conservative payout ratio of just 16% of its income after tax. A useful secondary check can be to evaluate whether HCA Healthcare 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 16% of its cash flow last year.
It's positive to see that HCA Healthcare'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?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see HCA Healthcare's earnings per share have risen 19% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past two years, HCA Healthcare has increased its dividend at approximately 11% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Is HCA Healthcare worth buying for its dividend? HCA Healthcare has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about HCA Healthcare, and we would prioritise taking a closer look at it.
Ever wonder what the future holds for HCA Healthcare? See what the 19 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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