Third Age Health Services (NZSE:TAH) Has Affirmed Its Dividend Of NZ$0.028

Third Age Health Services Limited (NZSE:TAH) will pay a dividend of NZ$0.028 on the 17th of June. The dividend yield will be 6.7% based on this payment which is still above the industry average.

See our latest analysis for Third Age Health Services

Third Age Health Services' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Third Age Health Services was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 5.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 72% by next year, which we think can be pretty sustainable going forward.

Third Age Health Services' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of NZ$0.0391 in 2021 to the most recent total annual payment of NZ$0.0935. This implies that the company grew its distributions at a yearly rate of about 34% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Third Age Health Services has seen EPS rising for the last five years, at 5.2% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

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. Just as an example, we've come across 3 warning signs for Third Age Health Services you should be aware of, and 2 of them are concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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