Cardinal Health's (NYSE:CAH) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Cardinal Health, Inc. (NYSE:CAH) has announced that it will be increasing its dividend by 1.0% on the 15th of July to $0.5107, up from last year's comparable payment of $0.506. This takes the annual payment to 1.4% of the current stock price, which is about average for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Cardinal Health. Read for free now.

Cardinal Health's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Cardinal Health's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 39.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

View our latest analysis for Cardinal Health

Cardinal Health Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from $1.37 total annually to $2.02. This implies that the company grew its distributions at a yearly rate of about 4.0% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Cardinal Health has grown earnings per share at 43% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Cardinal Health's Dividend

Overall, a dividend increase is always good, and we think that Cardinal Health is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Cardinal Health that investors should take into consideration. Is Cardinal Health 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.