Premier (NASDAQ:PINC) Is Due To Pay A Dividend Of $0.21

Premier, Inc.'s (NASDAQ:PINC) investors are due to receive a payment of $0.21 per share on 15th of December. This makes the dividend yield 3.6%, which will augment investor returns quite nicely.

View our latest analysis for Premier

Premier's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Premier's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 13.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 73%, which is comfortable for the company to continue in the future.

Premier Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the dividend has gone from $0.76 total annually to $0.84. This implies that the company grew its distributions at a yearly rate of about 2.5% over that duration. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Premier's EPS has declined at around 42% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Premier's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Premier (1 is a bit unpleasant!) that you should be aware of before investing. Is Premier 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.