HCA Healthcare (NYSE:HCA) Is Increasing Its Dividend To $0.66

The board of HCA Healthcare, Inc. (NYSE:HCA) has announced that it will be paying its dividend of $0.66 on the 29th of March, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 0.8%.

View our latest analysis for HCA Healthcare

HCA Healthcare's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, HCA Healthcare was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 31.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

HCA Healthcare's Dividend Has Lacked Consistency

HCA Healthcare has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from $1.40 total annually to $2.64. This means that it has been growing its distributions at 11% per annum over that time. 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. HCA Healthcare has seen EPS rising for the last five years, at 13% per annum. HCA Healthcare definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like HCA Healthcare's Dividend

Overall, a dividend increase is always good, and we think that HCA Healthcare 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for HCA Healthcare that investors need to be conscious of moving forward. Is HCA Healthcare not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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