Encompass Health Corporation (NYSE:EHC) will pay a $0.15 dividend on April 15th. The dividend yield based on this payment amount is 0.8%, which is slightly lower than other companies in the industry.
Check out our latest analysis for Encompass Health.
Encompass Health payments cover guaranteed income
Even if the dividend yield is low, it can become attractive if it continues for many years. Before making this announcement, Encompass Health easily earned enough profits to cover its dividend. This means that most of the revenue is reserved for business growth.
EPS is expected to grow by 31.8% over the next 12 months. If the dividend continues at this rate, the payout ratio could be 13% by next year, which we think is quite sustainable going forward.
Dividend volatility
The company has a long history of dividends, but the company has cut dividends in the past and its business performance is not good. Annual payments for the past 10 years were $0.72 in 2014 and $0.60 for the most recent fiscal year. Dividends declined at approximately 1.8% per year during this period. Dividend declines aren't usually something we look at, as it could indicate that the company is facing some challenges.
Encompass Health may have difficulty increasing dividends
Given that the dividend has been cut in the past, we need to see if earnings are growing, and if that could lead to dividend increases in the future. Earnings have been growing at about 4.0% a year over the past five years, which isn't huge, but still better than shrinking. Profit growth is slow, but on the plus side, the dividend payout ratio is low, and if the company decides to increase its payout ratio, it could potentially expect dividends to grow faster than profits.
In summary
Overall, we think Encompass Health is a solid choice as a dividend stock, even though the dividend wasn't increased this year. Although the dividend payout ratio seems good, unfortunately the company's dividend track record is not that great. It looks like it could continue to be a good dividend stock, but note that the payout ratio has been high in the past, so it could do so again.
Companies with stable dividend policies are likely to attract more investor interest than companies that suffer from a more inconsistent approach. Still, investors need to consider more factors than dividends when analyzing a company. For example, we chose 1 warning sign for Encompass Health Investors should consider this.Looking for more high-yield dividend ideas? Try ours A group of people with strong dividends.
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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.
