UNH 548.87 (+6.5%)
US91324P1021Healthcare PlansHealthcare Plans

Last update on 2024-06-25

UnitedHealth Group (UNH) - Dividend Analysis (Final Score: 8/8)

Comprehensive analysis of UnitedHealth Group's (UNH) dividend performance, achieving a perfect score of 8/8 based on an 8-criteria system.

Knowledge hint:
The dividend analysis assesses the performance and stability of UnitedHealth Group (UNH) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 8

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

Criteria
Dividend Yield Higher than the Industry Average?
1
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
1
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
1
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
1

The analysis evaluates UnitedHealth Group's (UNH) dividend policy based on 8 criteria. Key findings include a current dividend yield of 1.3847%, higher than the industry average of 0.87%. UNH's average annual dividend growth rate over 20 years is 85.04%, far above the 5% threshold. Additionally, the payout ratio averages 17.17%, well under the 65% mark, demonstrating conservative dividend payouts. Both dividends and earnings per share (EPS) have shown consistent growth, with UNH maintaining a healthy dividend coverage ratio. The company's free cash flow to dividend coverage has strengthened, indicating robust financial health. Dividends have been stable without significant drops in 20 years, showcasing reliability and strong financial health. This analysis underscores UNH’s stable and growing dividends, covered well by earnings and cash flow, solidifying its commitment to shareholder value.

Insights for Value Investors Seeking Stable Income

Given UnitedHealth Group's strong dividend performance, consistent growth, and robust financial health, it is a worthy consideration for investors seeking stable and reliable dividend income. The company's ability to consistently increase dividend payouts, cover them with earnings and free cash flow, and maintain a low payout ratio supports its attractiveness as a sustainable investment. Therefore, further investigation into UNH's stock is recommended for potential investment.

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?

The dividend yield measures the annual dividend income an investor receives per share, expressed as a percentage of the share price.

Historical Dividend Yield of UnitedHealth Group (UNH) in comparison to the industry average

UnitedHealth Group's (UNH) current dividend yield of 1.3847% is significantly higher than the industry average of 0.87%. Historically, UNH's dividend yield has shown a substantial increase from its initial value of 0.0258% in 2003, reaching a peak of 1.7689% in 2013, and stabilizing around the current levels in recent years. This upward trend indicates a strong commitment to delivering value to shareholders through dividends. Coupled with the consistent spike in stock prices—from $29.09 in 2003 to over $526.47 in 2023—and a steady hike in dividends per share—from $0.0075 in 2003 to $7.29 in 2023—UNH demonstrates robustness in its long-term financial health and its ability to generate shareholder returns. Overall, the higher-than-average dividend yield, supported by historical consistency and increasing payout, signifies a positive trend and reflects the company's strong operational performance and shareholder-oriented policies.

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

The Dividend Growth Rate measures the annualized percentage growth rate of a dividend-paying company's stock over a specific period. It is crucial for investors who seek income and capital appreciation, as it signals a company's financial health and its ability to increase payouts over time.

Dividend Growth Rate of UnitedHealth Group (UNH)

UnitedHealth Group (UNH) has shown a highly fluctuating dividend growth rate over the past 20 years. The values range from 0% to as high as 1250%. When examining these fluctuations, it is notable that early years exhibited either 0% or extreme spikes. However, a more consistent, albeit diminishing, trend can be observed from 2012 onward, with decreasing growth rates reaching 13.9063% in 2023. Despite the variability, the average dividend growth ratio of 85.04% is significantly above the 5% threshold, indicating a strong historical capacity to increase dividend payouts. This trend can be considered good but requires scrutiny due to the unsustainable outliers that may inflate this average. Looking at more recent years’ more consistent, lower rates might provide a more realistic gauge of current dividend growth potential.

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

The average payout ratio is the proportion of earnings a company pays to its shareholders in the form of dividends. A ratio lower than 65% is preferred as it indicates sustainable dividend payouts without sacrificing potential growth opportunities.

Dividends Payout Ratio of UnitedHealth Group (UNH)

The data for UnitedHealth Group (UNH) reveals that from 2003 to 2023, the average payout ratio was approximately 17.17%—significantly lower than the 65% benchmark. This low average indicates that UNH has consistently adhered to a conservative dividend payout strategy over the last two decades. The company ensures it retains a considerable portion of its earnings for reinvestments and growth initiatives while sustainably distributing dividends to shareholders. However, it's noteworthy that in the years 2008 and 2009, and from 2010 until 2017, the ratios spiked significantly, raising red flags momentarily. Since 2021, the ratio has stabilized to levels around 30%, which, while higher than the historical average, remains well within a healthy range.

Dividends Well Covered by Earnings?

Assessing the coverage of dividends by earnings is crucial as it reflects a company's ability to sustain its dividends based on its profits. A well-covered dividend typically indicates financial stability and prudent management.

Historical coverage of Dividends by Earnings of UnitedHealth Group (UNH)

UnitedHealth Group’s EPS has shown a remarkably consistent growth trajectory, increasing from $1.48 in 2003 to an impressive $24.1175 in 2023. Concurrently, dividends per share also exhibited growth, rising from a negligible $0.0075 in 2003 to $7.29 in 2023. Despite the growth in both metrics, the key insight is the dividend coverage ratio (Dividends per Share covered by EPS), which has ranged between approximately 0.005 to 0.31. This means that throughout the years, EPS has consistently exceeded dividends paid, with a notable increase in the latter years stabilizing around 0.30. This suggests that UnitedHealth Group not only ensures generous dividends but also retains a substantial portion of earnings for reinvestment or other strategic purposes. Overall, this trend indicates a positive and healthy financial position, with dividends being well-covered by earnings.

Dividends Well Covered by Cash Flow?

This criterion assesses whether the company's free cash flow is sufficient to cover its dividend payouts. It's essential to ensure that the dividends are well-covered by the cash generated from operations to sustain and potentially grow the dividend payouts in the future.

Historical coverage of Dividends by Cashflow of UnitedHealth Group (UNH)

Analyzing the data from 2003 to 2023, UnitedHealth Group (UNH) has shown a drastic improvement in how well its dividends are covered by free cash flow. In 2003, the coverage ratio was a mere 0.34%, indicating that dividends were barely supported by the free cash flow. However, this figure has markedly increased over the years, reaching a substantial 26.33% by 2023. This trend signifies that the company has become significantly more capable of covering its dividend payouts with its free cash flow. Such a positive trend showcases robust financial health and reinforces confidence in the sustainability and potential growth of future dividend payments. Therefore, this trend is decidedly good for UnitedHealth Group under this criterion.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Historical Dividends per Share of UnitedHealth Group (UNH)

UnitedHealth Group (UNH) has shown a robust increase in its dividend per share over the past 20 years. Starting from a mere $0.0075 in 2003, the dividend per share has consistently risen to $7.29 in 2023. This incline is indicative of strong financial health and profitability. Notably, at no point did the dividend per share drop by more than 20%, which underscores stability and the company's commitment to returning value to shareholders. Such a trend is highly positive for income-seeking investors looking for reliable and growing dividend payments.

Dividends Paid for Over 25 Years?

Explain the criterion for UnitedHealth Group (UNH) and why it is important to consider

Historical Dividends per Share of UnitedHealth Group (UNH)

Dividends Paid for Over 25 Years? This evaluates whether UnitedHealth Group has paid continuous dividends for over 25 years. This is significant as it demonstrates the company’s ability to return consistent value to shareholders, indicating financial stability, resilience through various economic cycles, and a long-term commitment to shareholder returns.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for UnitedHealth Group (UNH) and why it is important to consider

Historical Number of Shares of UnitedHealth Group (UNH)

Reliable stock repurchases involve a company consistently buying back its own shares over a set period. It's a sign of robust financial health, as the company has sufficient capital to return money to shareholders. Moreover, repurchases can reduce the number of outstanding shares, often boosting earnings per share (EPS) and potentially supporting stock prices. Examining this over a 20-year span provides a comprehensive view of the company's long-term financial strategies and shareholder value emphasis.


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