Premier (NASDAQ:PINC) Has Announced That It Will Be Increasing Its Dividend To US$0.20
Premier, Inc.'s (NASDAQ:PINC) dividend will be increasing to US$0.20 on 15th of September. This makes the dividend yield 2.2%, which is above the industry average.
See our latest analysis for Premier
Premier's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Premier's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to fall by 6.0%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is comfortable for the company to continue in the future.
Premier Doesn't Have A Long Payment History
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 33% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Premier will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Premier is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Premier you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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. 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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