In This Article:
Third Age Health Services Limited (NZSE:TAH) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of February to NZ$0.039. This takes the dividend yield to 3.4%, which shareholders will be pleased with.
See our latest analysis for Third Age Health Services
Third Age Health Services' 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. The last dividend was quite easily covered by Third Age Health Services' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
If the trend of the last few years continues, EPS will grow by 11.7% over the next 12 months. If the dividend continues on this path, the payout ratio could be 73% by next year, which we think can be pretty sustainable going forward.
Third Age Health Services' Dividend Has Lacked Consistency
The track record isn't the longest, but we are already seeing a bit of instability in the payments. The dividend has gone from an annual total of NZ$0.0391 in 2021 to the most recent total annual payment of NZ$0.101. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Third Age Health Services has been growing its earnings per share at 12% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Third Age Health Services Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Third Age Health Services is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Third Age Health Services that investors should take into consideration. Is Third Age Health Services not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.