U.S. Physical Therapy, Inc. (NYSE:USPH) Looks Interesting, And It's About To Pay A Dividend
U.S. Physical Therapy, Inc. (NYSE:USPH) is about to trade ex-dividend in the next 2 days. You will need to purchase shares before the 12th of March to receive the dividend, which will be paid on the 17th of April.
U.S. Physical Therapy's next dividend payment will be US$0.32 per share, and in the last 12 months, the company paid a total of US$1.28 per share. Looking at the last 12 months of distributions, U.S. Physical Therapy has a trailing yield of approximately 1.2% on its current stock price of $104.77. If you buy this business for its dividend, you should have an idea of whether U.S. Physical Therapy's dividend is reliable and sustainable. So we need to investigate whether U.S. Physical Therapy can afford its dividend, and if the dividend could grow.
View our latest analysis for U.S. Physical Therapy
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see U.S. Physical Therapy paying out a modest 47% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 28% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see U.S. Physical Therapy earnings per share are up 9.4% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. U.S. Physical Therapy has delivered 17% dividend growth per year on average over the past nine years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Has U.S. Physical Therapy got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and U.S. Physical Therapy is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but U.S. Physical Therapy is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
In light of that, while U.S. Physical Therapy has an appealing dividend, it's worth knowing the risks involved with this stock. For example - U.S. Physical Therapy has 2 warning signs we think you should be aware of.
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 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.
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