Yahoo Finance Should You Buy HCA Healthcare, Inc. (NYSE:HCA) For Its Upcoming Dividend?
It looks like HCA Healthcare, Inc. (NYSE:HCA) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase HCA Healthcare's shares before the 16th of March to receive the dividend, which will be paid on the 31st of March.
The company's next dividend payment will be US$0.60 per share, and in the last 12 months, the company paid a total of US$2.40 per share. Last year's total dividend payments show that HCA Healthcare has a trailing yield of 1.0% on the current share price of $246.6. 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! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for HCA Healthcare
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. HCA Healthcare is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether HCA Healthcare generated enough free cash flow to afford its dividend. The good news is it paid out just 16% of its free cash flow in the 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.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see HCA Healthcare's earnings have been skyrocketing, up 27% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, HCA Healthcare looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. HCA Healthcare has delivered 11% dividend growth per year on average over the past five years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is HCA Healthcare an attractive dividend stock, or better left on the shelf? HCA Healthcare has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past five years, but the conservative payout ratio makes the current dividend look sustainable. HCA Healthcare looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks HCA Healthcare is facing. Our analysis shows 3 warning signs for HCA Healthcare that we strongly recommend you have a look at before investing in the company.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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