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Estia Health Limited (ASX:EHE): Dividend Is Coming In 2 Days, Should You Buy?

Attention dividend hunters! Estia Health Limited (ASX:EHE) will be distributing its dividend of AU$0.08 per share on the 28 September 2018, and will start trading ex-dividend in 2 days time on the 06 September 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Estia Health’s latest financial data to analyse its dividend characteristics.

See our latest analysis for Estia Health

How I analyze a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

  • Is their annual yield among the top 25% of dividend payers?

  • Does it consistently pay out dividends without missing a payment of significantly cutting payout?

  • Has it increased its dividend per share amount over the past?

  • Is its earnings sufficient to payout dividend at the current rate?

  • Will it have the ability to keep paying its dividends going forward?

ASX:EHE Historical Dividend Yield September 3rd 18
ASX:EHE Historical Dividend Yield September 3rd 18

How well does Estia Health fit our criteria?

The company currently pays out 100% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is not well-covered by its earnings. Going forward, analysts expect EHE’s payout to remain around the same level at 93.8% of its earnings, which leads to a dividend yield of 5.8%. Furthermore, EPS should increase to A$0.18.

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If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Estia Health as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, Estia Health produces a yield of 5.2%, which is high for Healthcare stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Estia Health’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three relevant aspects you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for EHE’s future growth? Take a look at our free research report of analyst consensus for EHE’s outlook.

  2. Valuation: What is EHE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether EHE is currently mispriced by the market.

  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.