Income Investors Should Know That Regis Healthcare Limited (ASX:REG) Goes Ex-Dividend Soon

Regis Healthcare Limited (ASX:REG) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Regis Healthcare's shares before the 9th of September to receive the dividend, which will be paid on the 24th of September.

The company's next dividend payment will be AU$0.0813 per share, and in the last 12 months, the company paid a total of AU$0.16 per share. Looking at the last 12 months of distributions, Regis Healthcare has a trailing yield of approximately 2.1% on its current stock price of AU$7.72. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Regis Healthcare paid out 100% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 20% of its cash flow last year.

It's good to see that while Regis Healthcare's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

See our latest analysis for Regis Healthcare

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Regis Healthcare, with earnings per share up 9.2% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Regis Healthcare has seen its dividend decline 0.8% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid Regis Healthcare? Earnings per share have grown modestly, and last year Regis Healthcare paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Regis Healthcare, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 3 warning signs for Regis Healthcare (of which 1 is a bit unpleasant!) you should know about.

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.

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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.