Encompass Health (NYSE:EHC) Has Announced A Dividend Of US$0.28

Encompass Health Corporation (NYSE:EHC) has announced that it will pay a dividend of US$0.28 per share on the 20th of July. Based on this payment, the dividend yield on the company's stock will be 1.8%, which is an attractive boost to shareholder returns.

See our latest analysis for Encompass Health

Encompass Health's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Encompass Health's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 4.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Encompass Health Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$0.72 in 2013 to the most recent annual payment of US$1.12. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Encompass Health has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Has 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. Encompass Health has seen EPS rising for the last five years, at 6.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Encompass Health's prospects of growing its dividend payments in the future.

Our Thoughts On Encompass Health's Dividend

Overall, a consistent dividend is a good thing, and we think that Encompass Health has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Encompass Health that investors should take into consideration. Is Encompass 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.