Interested In Green Cross Health Limited (NZSE:GXH)’s Upcoming 3.4% Dividend? You Have 4 Days Left
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Green Cross Health Limited (NZSE:GXH) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 10th of December will not receive this dividend, which will be paid on the 19th of December.
Green Cross Health's next dividend payment will be NZ$0.041 per share. Last year, in total, the company distributed NZ$0.07 to shareholders. Last year's total dividend payments show that Green Cross Health has a trailing yield of 5.8% on the current share price of NZ$1.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Green Cross Health
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Green Cross Health paid out 67% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Green Cross Health's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Green Cross Health paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Green Cross Health's earnings per share have been shrinking at 2.4% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Green Cross Health has delivered an average of 21% per year annual increase in its dividend, based on the past nine years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
The Bottom Line
Has Green Cross Health got what it takes to maintain its dividend payments? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Green Cross Health's dividend merits.
Curious about whether Green Cross Health has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
