HCA Healthcare's (NYSE:HCA) Shareholders Will Receive A Bigger Dividend Than Last Year

HCA Healthcare, Inc. (NYSE:HCA) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to $0.60. Even though the dividend went up, the yield is still quite low at only 0.9%.

View our latest analysis for HCA Healthcare

HCA Healthcare's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, HCA Healthcare's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 14.0% over the next year. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

HCA Healthcare's Dividend Has Lacked Consistency

Looking back, HCA Healthcare's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $1.40 in 2018 to the most recent total annual payment of $2.40. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. HCA Healthcare has seen EPS rising for the last five years, at 22% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

HCA Healthcare Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for HCA Healthcare that investors should take into consideration. 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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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.