Yahoo Finance Cardinal Health (NYSE:CAH) Is Increasing Its Dividend To $0.5056
Cardinal Health, Inc. (NYSE:CAH) has announced that it will be increasing its periodic dividend on the 15th of July to $0.5056, which will be 1.0% higher than last year's comparable payment amount of $0.501. This makes the dividend yield 2.0%, which is above the industry average.
View our latest analysis for Cardinal Health
Cardinal Health's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Cardinal Health's dividend made up quite a large proportion of earnings but only 24% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 27% which is fairly sustainable.
Cardinal Health Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $1.21, compared to the most recent full-year payment of $2. This means that it has been growing its distributions at 5.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
Dividend Growth Could Be Constrained
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Cardinal Health has seen EPS rising for the last five years, at 196% per annum. However, Cardinal Health isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Cardinal Health that investors should take into consideration. Is Cardinal Health not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
