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Spire Healthcare Group plc (LON:SPI) will increase its dividend on the 20th of June to £0.023, which is 9.5% higher than last year's payment from the same period of £0.021. This makes the dividend yield 1.3%, which is above the industry average.
Spire Healthcare Group's Future Dividend Projections Appear Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Spire Healthcare Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.7%, so there isn't too much pressure on the dividend.
Check out our latest analysis for Spire Healthcare Group
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.018 in 2015, and the most recent fiscal year payment was £0.023. This means that it has been growing its distributions at 2.5% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Spire Healthcare Group has grown earnings per share at 29% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Spire Healthcare Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Spire Healthcare Group that investors need to be conscious of moving forward. Is Spire Healthcare Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.