Stock Analysis

Regis Healthcare (ASX:REG) Is Paying Out Less In Dividends Than Last Year

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Regis Healthcare Limited (ASX:REG) has announced it will be reducing its dividend payable on the 14th of April to A$0.02, which is 43% lower than what investors received last year for the same period. However, the dividend yield of 3.7% is still a decent boost to shareholder returns.

See our latest analysis for Regis Healthcare

Regis Healthcare's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

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 3.9%, so there isn't too much pressure on the dividend.

ASX:REG Historic Dividend March 1st 2023

Regis Healthcare's Dividend Has Lacked Consistency

Looking back, Regis Healthcare's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of A$0.176 in 2016 to the most recent total annual payment of A$0.0584. The dividend has fallen 67% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Regis Healthcare's EPS has fallen by approximately 65% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Regis Healthcare's Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. To that end, Regis Healthcare has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.