Yahoo Finance Only Three Days Left To Cash In On Third Age Health Services' (NZSE:TAH) Dividend
Readers hoping to buy Third Age Health Services Limited (NZSE:TAH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Third Age Health Services' shares on or after the 7th of June, you won't be eligible to receive the dividend, when it is paid on the 20th of June.
The company's next dividend payment will be NZ$0.04 per share, on the back of last year when the company paid a total of NZ$0.086 to shareholders. Looking at the last 12 months of distributions, Third Age Health Services has a trailing yield of approximately 3.1% on its current stock price of NZ$2.81. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Third Age Health Services
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Third Age Health Services is paying out an acceptable 72% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Third Age Health Services generated enough free cash flow to afford its dividend. It paid out 78% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
It's positive to see that Third Age Health Services'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 Third Age Health Services paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Third Age Health Services, with earnings per share up 3.4% on average over the last five years. A payout ratio of 72% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.
Unfortunately Third Age Health Services has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
Final Takeaway
Is Third Age Health Services an attractive dividend stock, or better left on the shelf? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, while it has some positive characteristics, we're not inclined to race out and buy Third Age Health Services today.
With that being said, if dividends aren't your biggest concern with Third Age Health Services, you should know about the other risks facing this business. Our analysis shows 3 warning signs for Third Age Health Services and you should be aware of them before buying any shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
