Some investors rely on dividends to grow their wealth. If you're one of those dividend experts, you might want to know the following: Elevance Health Co., Ltd. (NYSE:ELV) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date and is the closing date on which a shareholder is on the company's books and eligible for dividend payments. It is important to be aware of the ex-dividend date, as stock trades must be settled on or before the record date. Therefore, you can buy Elevance Health stock before March 7th to receive the dividend the company pays on his March 22nd.
The company's next dividend payment will be $1.63 per share, following a total of $6.52 paid to shareholders last year. Looking at the past 12 months of distributions, Elevance Health has a yield of approximately 1.3% on its current stock price of $499.11. If you buy this business for its dividend, you need to understand whether Elevance Health's dividend is reliable and sustainable. We need to see if the dividend is covered by profit and if it's growing.
Check out our latest analysis for Elevance Health.
Dividends are usually paid out of a company's profits. If a company pays more in dividends than it earned in profit, then the dividend might become unsustainable. Elevance Health pays out just 23% of its after-tax profits, which is low enough to leave enough headroom in case of adverse events. But cash flow is more important than profit for assessing a dividend, so we need to see if the company generated enough cash to pay its dividend. Good news is that the dividend is well covered by free cash flow, with the company paying out 21% of its cash flow last year.
It's reassuring to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio and analyst estimates of its future dividends.
Are profits and dividends growing?
Companies with promising growth potential are usually the ones that pay the most dividends, since it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is cut, you can expect the stock to sell off heavily at the same time. Fortunately for our readers, Elevance Health's earnings per share have grown at 12% per year over the past five years. The company has managed to grow its profits rapidly while reinvesting most of its profits within the business. Fast-growing companies that reinvest heavily are attractive from a dividend perspective, especially since they can increase payout ratios later on.
The main way most investors assess a company's dividend prospects is by looking at its historical dividend growth rate. Elevance Health has grown its dividend by an average of 16% each year, based on the past 10 years of dividend payments. It's interesting to see that both earnings per share and dividends have grown rapidly over the past few years.
conclusion
Should investors buy Elevance Health for its upcoming dividend? Elevance Health has been growing its earnings rapidly and its payout ratio is conservatively low, suggesting it is reinvesting heavily in its business doing. Sterling combination. There's a lot to like about Elevance Health, so I'd make it a priority to take a closer look.
Want to know what other investors think about Elevance Health? See what analysts are predicting by visualizing past and future estimated earnings and cash flow.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
