Last update on 2024-06-27

HCA Healthcare (HCA) - Dividend Analysis (Final Score: 4/8)

Explore HCA Healthcare's dividend stability and performance using an 8-criteria system. Get insights on dividend yield, growth rate, and payout ratios.

Short Analysis - Dividend Score: 4

We're running HCA Healthcare (HCA) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

HCA Healthcare's dividends aren't super impressive when you hold them up to certain standards. While they are paying dividends and trying to be regular about it since 2018, they haven't matched the industry average yield, plus their growth rate is a lot lower than what serious investors usually look for. Their cash flow generally covers their dividends, but some years are more of a struggle. They haven't been paying dividends for a long 25-year span, but they have been reliable since they started again in 2018. Also, they’ve been good at buying back their own shares, which can make remaining shares more valuable.

Insights for Value Investors Seeking Stable Income

If you're thinking of investing mainly for dividends, HCA Healthcare might not be your best bet because they don't meet all the high standards. But if you're looking for a mix of some dividends and potential stock price growth, it might be worth keeping an eye on. The company is relatively new to consistently paying out dividends, but they're showing potential. Just make sure to watch their cash flow and payout ratios closely.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much in dividends a company pays out each year relative to its stock price. It is important as it provides investors with insight into the income they might expect from holding a share, assuming the dividend remains unchanged.

The dividend yield of HCA Healthcare (HCA) for 2023 stands at 0.8867%, which is marginally lower than the industry average of 0.9%. This unfavorable comparison signals a potential area where HCA might not be as appealing to dividend-seeking investors compared to its peers. Over the last 20 years, the company has shown fluctuations in its dividend yield, with peak yields like 21.5446% in 2012, an anomaly compared to other years due to possibly one-time special dividends. Between 2019 and 2023, the dividend yield trend shows efforts to stabilize, but 2023's figure slightly receded from the previous year. For context, the stock price has dramatically increased, from $22.03 in 2011 to $270.68 in 2023—a clear indication of significant capital appreciation, which might justify the lower relative yield. Still, stability in yield closer to industry averages would enhance HCA's attractiveness to dividend investors.

Average annual Growth Rate higher than 5% in the last 20 years?

Criterion 1.1 inspects whether the dividend growth rate exceeds 5% over the last 20 years and seeing why that's crucial.

Analyzing HCA's dividend distribution for the past 20 years shows an erratic trend, marked by significant increases and decreases, particularly in 2013, 2019, and 2020. The existence of zeros for several consecutive years suggests HCA has only recently adopted a regular dividend policy. The average dividend growth rate standing at approximately 1.69% is considerably below the 5% threshold, indicating no immediate positive trend. Thus, this does not bode well for dividend-focused investors since the growth rate falls short of the desired mark.

Average annual Payout Ratio lower than 65% in the last 20 years?

Explain the criterion for HCA Healthcare (HCA) and why it is important to consider

The criterion examines whether HCA Healthcare's average payout ratio is lower than 65% over the past 20 years.

Dividends Well Covered by Earnings?

Explain the criterion for HCA Healthcare (HCA) and why it is important to consider

Dividends are considered well-covered when the company’s earnings per share (EPS) are significantly higher than the dividends paid per share. This ensures that the company retains enough earnings to sustain operations, reinvest in the business, and cushion against economic slowdowns. Reviewing this criterion is vital for assessing the sustainability of dividend payments.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow is a critical metric for assessing the sustainability of a company's dividend payments. It measures how comfortably a company can cover its dividend payouts from its free cash flow. A higher ratio generally indicates that the company generates sufficient cash flow to support its dividends, reducing the risk of dividend cuts.

The Free Cash Flow (FCF) values and Dividend Payout amounts for HCA Healthcare show variability. Since 2012, FCF has generally been positive and growing, peaking at $6.397 billion in 2020 but declining to $4.687 billion by 2023. On the dividend side, the dividend payout amount has also seen fluctuating trends, particularly spiking in 2010. This volatility affects the Dividend Coverage ratios, which have fluctuated significantly over the years. For instance, in 2010, the ratio was exceptionally high at 2.41875, implying dividends were well covered. However, in years like 2016 and 2017, the coverage ratios of 0.1500 and 0.1858, respectively, suggest dividends were moderately covered by cash flow. Recently, the ratio stands at 0.1410 in 2023, which, although higher than early years, indicates limited margin. Given these findings, while HCA Healthcare generally maintains adequate cash flow for dividends, certain years have posed challenges, requiring close monitoring for future cash flow stability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments ensures a reliable income stream for investors; examining any drop over 20% in past two decades highlights consistency.

HCA Healthcare (HCA) has shown an evolving dividend policy over the past 20 years. From 2003 to 2011, the company did not pay any regular dividends. A notable one-time dividend of 6.5 per share in 2012 was followed by no payouts until 2018 when regular dividends began. Overall, no year experienced a drop in dividends over 20%; each year's dividends consistently built on the previous year. This trend of stabilizing and increasing dividends, particularly from 2018 onwards, suggests improving financial health and commitment to shareholder returns, a positive trend for income-seeking investors.

Dividends Paid for Over 25 Years?

HCA Healthcare (HCA) consistently paying dividends for over 25 years?

Based on the data, HCA Healthcare (HCA) has not consistently paid dividends for over 25 years. Notably, from 2012 onward, while the company paid a special dividend of $6.5 in 2012, regular dividend payments started in 2018 with $1.4 per share, followed by $1.6 in 2019, $0.77 in 2020, $1.92 in 2021, $2.24 in 2022, and $2.4 in 2023. Consequently, the dividend payment history is sporadic with a significant gap before regular payments commenced. This trend suggests a relatively new commitment to consistent dividend payouts, qualifying as a potentially positive trend in recent years but negative in terms of long-term consistency.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Analyzing the stock repurchase trend of HCA Healthcare (HCA) over the past 20 years, the data reveals a somewhat consistent and reliable share buyback scheme in specific years. During this period, HCA managed to repurchase shares effectively in years: 2004, 2005, 2006, 2012, 2014, 2015, 2016, 2017, 2018, 2019, 2021, 2022, and 2023. This accounts for 13 out of the 20 observed years, representing active corporate financial management aimed at returning value to shareholders through share buybacks. From a quantitative perspective, the number of shares outstanding has markedly decreased from over 510 million in 2003 to approximately 272 million in 2023. This reduction signals a strong commitment to repurchasing shares, leading to an average annual repurchase rate of -2.947%, which is quite substantial. This repurchase strategy reflects positively on HCA's management approach, showcasing prudence in capital allocation, potentially enhancing earnings per share (EPS), and improving shareholder value. Nevertheless, it's crucial to account for potential market conditions or strategic considerations that might influence these repurchase decisions.