In This Article:
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Ryman Healthcare Limited (NZSE:RYM) has paid a dividend to shareholders. It currently yields 2.0%. Does Ryman Healthcare tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Check out our latest analysis for Ryman Healthcare
Want to help shape the future of investing tools and platforms? Take the survey and be part of one of the most advanced studies of stock market investors to date.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
-
Is it the top 25% annual dividend yield payer?
-
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
-
Has dividend per share amount increased over the past?
-
Does earnings amply cover its dividend payments?
-
Will it be able to continue to payout at the current rate in the future?
How well does Ryman Healthcare fit our criteria?
The company currently pays out 31% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect RYM’s payout to increase to 50% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.5%. However, EPS is forecasted to fall to NZ$0.63 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. RYM has increased its DPS from NZ$0.052 to NZ$0.22 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes RYM a true dividend rockstar.
Compared to its peers, Ryman Healthcare generates a yield of 2.0%, which is on the low-side for Healthcare stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank Ryman Healthcare as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three fundamental factors you should look at: