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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that UnitedHealth Group Incorporated (NYSE:UNH) is about to go ex-dividend in just three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, UnitedHealth Group investors that purchase the stock on or after the 3rd of December will not receive the dividend, which will be paid on the 14th of December.
The company's next dividend payment will be US$1.45 per share, on the back of last year when the company paid a total of US$5.80 to shareholders. Calculating the last year's worth of payments shows that UnitedHealth Group has a trailing yield of 1.3% on the current share price of $439.91. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether UnitedHealth Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for UnitedHealth Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. UnitedHealth Group paid out a comfortable 33% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 22% of its free cash flow last year.
It's encouraging 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, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see UnitedHealth Group has grown its earnings rapidly, up 22% a year for the past five years. UnitedHealth Group is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.