There's A Lot To Like About UnitedHealth Group's (NYSE:UNH) Upcoming US$1.25 Dividend

NYSE:UNH) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 11th of September will not receive this dividend, which will be paid on the 22nd of September.” data-reactid=”28″>UnitedHealth Group Incorporated (NYSE:UNH) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 11th of September will not receive this dividend, which will be paid on the 22nd of September.

UnitedHealth Group’s upcoming dividend is US$1.25 a share, following on from the last 12 months, when the company distributed a total of US$5.00 per share to shareholders. Last year’s total dividend payments show that UnitedHealth Group has a trailing yield of 1.6% on the current share price of $312. If you buy this business for its dividend, you should have an idea of whether UnitedHealth Group’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.

View our latest analysis for UnitedHealth Group ” data-reactid=”30″> View our latest analysis for UnitedHealth Group

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. UnitedHealth Group paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether UnitedHealth Group generated enough free cash flow to afford its dividend. What’s good is that dividends were well covered by free cash flow, with the company paying out 21% of its 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.

here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″>Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

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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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s comforting to see UnitedHealth Group’s earnings have been skyrocketing, up 26% per annum for the past five years. UnitedHealth Group looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. UnitedHealth Group has delivered an average of 67% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is UnitedHealth Group worth buying for its dividend? We love that UnitedHealth Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. It’s a promising combination that should mark this company worthy of closer attention.

2 warning signs for UnitedHealth Group and you should be aware of these before buying any shares.” data-reactid=”55″>On that note, you’ll want to research what risks UnitedHealth Group is facing. Our analysis shows 2 warning signs for UnitedHealth Group and you should be aware of these before buying any shares.