Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Spire Healthcare Group plc (LON:SPI) has returned to shareholders over the past 3 years, an average dividend yield of 1.00% annually. Should it have a place in your portfolio? Let’s take a look at Spire Healthcare Group in more detail.
Check out our latest analysis for Spire Healthcare Group
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it consistently paid a stable dividend without missing a payment or drastically 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 the company be able to keep paying dividend based on the future earnings growth?
Does Spire Healthcare Group pass our checks?
Spire Healthcare Group has a trailing twelve-month payout ratio of 90.62%, meaning the dividend is not sufficiently covered by its earnings. However, going forward, analysts expect SPI’s payout to fall into a more sustainable range of 24.07% of its earnings, which leads to a dividend yield of 1.93%. Moreover, EPS should increase to £0.12, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Spire Healthcare Group 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.
Relative to peers, Spire Healthcare Group generates a yield of 2.32%, which is high for Healthcare stocks but still below the market’s top dividend payers.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Spire Healthcare Group for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for SPI’s future growth? Take a look at our free research report of analyst consensus for SPI’s outlook.
- Valuation: What is SPI 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 SPI is currently mispriced by the market.
- 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.