HCA Healthcare's (NYSE:HCA) Upcoming Dividend Will Be Larger Than Last Year's

HCA Healthcare, Inc. (NYSE:HCA) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of March to $0.72. This takes the annual payment to 0.9% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for HCA Healthcare

HCA Healthcare's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, HCA Healthcare was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 41.0%. If the dividend continues on this path, the payout ratio could be 9.6% by next year, which we think can be pretty sustainable going forward.

HCA Healthcare's Dividend Has Lacked Consistency

It's comforting to see that HCA Healthcare has been paying a dividend for a number of years now, however it has been cut at least once in that time. 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 $2.88. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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 impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for HCA Healthcare's prospects of growing its dividend payments in the future.

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for HCA Healthcare that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.