Humana (NYSE:HUM) Has Affirmed Its Dividend Of $0.885

Humana Inc. (NYSE:HUM) will pay a dividend of $0.885 on the 31st of October. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Humana's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Humana's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Humana'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 102.1%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Humana

Humana Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.12 in 2015, and the most recent fiscal year payment was $3.54. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Humana's EPS has declined at around 13% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, a consistent dividend is a good thing, and we think that Humana has the ability to continue this into the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. 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. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 18 analysts are forecasting a turnaround in our free collection of analyst estimates here. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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