Here’s what we love about Virtus Health’s upcoming dividend (ASX: VRT)
It looks like Virtus Health Limited (ASX: VRT) is set to be ex-dividend within the next four days. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for the payment of a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you would not appear on the company’s books on the date of registration. Thus, you can buy Virtus Health shares before October 8 in order to receive the dividend that the company will pay on October 29.
The company’s next dividend payment will be A $ 0.12 per share, and over the past 12 months the company has paid a total of A $ 0.24 per share. Based on the value of last year’s payouts, Virtus Health has a sliding 4.1% return on the current share price of AU $ 5.8. We love to see companies pay a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our goose that lays the golden eggs! You have to see if the dividend is covered by profits and if it increases.
Check out our latest review for Virtus Health
Dividends are generally paid out of company profits. If a company pays more dividends than it made a profit, then the dividend could be unsustainable. Virtus Health paid a comfortable 45% of its profit last year. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It distributed 38% of its free cash flow in the form of dividends, a comfortable level of distribution for most companies.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold massively at the same time. That’s why it’s a relief to see Virtus Health’s earnings per share grow 4.2% per year over the past five years. Recent growth has not been impressive. However, companies that see their growth slowing can often choose to pay a higher percentage of their profits to shareholders, which could see the dividend continue to rise.
Many investors will assess a company’s dividend yield by evaluating how much dividend payments have changed over time. It appears that Virtus Health’s dividends are largely the same as they were eight years ago.
The bottom line
Is Virtus Health an attractive dividend-paying stock, or rather left on the shelf? Earnings per share have grown moderately and Virtus Health is paying less than half of its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see profits rise faster, but Virtus Health is careful with its dividend payouts and could still perform reasonably well in the long term. Virtus Health looks solid on this analysis overall, and we would definitely consider taking a closer look.
With this in mind, an essential part of in-depth stock research is being aware of the risks stocks currently face. To help you, we have discovered 4 warning signs for Virtus Health which you should know before investing in their stocks.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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