Yahoo Finance Regis Healthcare's (ASX:REG) Shareholders Will Receive A Smaller Dividend Than Last Year
Regis Healthcare Limited (ASX:REG) has announced that on 30th of September, it will be paying a dividend ofA$0.0232, which a reduction from last year's comparable dividend. However, the dividend yield of 2.8% still remains in a typical range for the industry.
View our latest analysis for Regis Healthcare
Regis Healthcare's Earnings Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable. 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.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 7.6%, so there isn't too much pressure on 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. This suggests that the dividend might not be the most reliable. Since 2015, the annual payment back then was A$0.176, compared to the most recent full-year payment of A$0.0584. The dividend has fallen 67% over that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Regis Healthcare's EPS has declined at around 51% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
The Dividend Could Prove To Be Unreliable
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Regis Healthcare that investors should know about before committing capital to this stock. 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.
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