Regis Healthcare (ASX:REG) Is Due To Pay A Dividend Of A$0.0628
The board of Regis Healthcare Limited (ASX:REG) has announced that it will pay a dividend on the 11th of April, with investors receiving A$0.0628 per share. This makes the dividend yield about the same as the industry average at 2.6%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Regis Healthcare's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for Regis Healthcare
Regis Healthcare's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Regis Healthcare is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 72%, which makes us pretty comfortable with the sustainability of the dividend.
Regis Healthcare's Dividend Has Lacked Consistency
Regis Healthcare has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of A$0.176 in 2015 to the most recent total annual payment of A$0.0948. Doing the maths, this is a decline of about 6.6% per year. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth Potential Is Shaky
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Regis Healthcare's EPS has fallen by approximately 68% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Regis Healthcare's Dividend Doesn't Look Sustainable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Regis Healthcare is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 6 analysts are forecasting a turnaround in our free collection of analyst estimates here. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
