Healthcare Services Group Keeps Raising Dividend

Steven Bobson, Europe & Americas Editor
September 23, 2012 /

Getting a dividend each quarter is nice. But getting a higher payout every quarter is even better. That’s whatHealthcare Services Group ( HCSG ) has offered investors.

The Bensalem, Pa.-based provider of housekeeping, laundry and food services to long-term care facilities has boosted its payout 36 times since it started paying regular quarterly dividends in the second quarter of 2003. Seven of the hikes have come since last year.

Healthcare Services tends to announce its payout increases in conjunction with its quarterly earnings announcements.

The company most recently raised its dividend in July to 16.38 cents a share from 16.25 cents. Although the increase was small, Healthcare Services has more than doubled its payout since 2007.

On an annualized basis, Healthcare Services pays investors 66 cents a share. This works out to a yield of about 3%, which tops the roughly 2.5% yield in the S&P 500.

Healthcare Services offers the largest yield in IBD’s Commercial Services-Healthcare group. But only two companies in the 13-member group pay dividends. The other, National Research ( NRCI ), has a 2.1% yield. But the stock is thinly traded.

In the past, Healthcare Services has attributed the dividend increases to its strong financial position and performance.

The company delivered double-digit profit growth in every recent year except 2008.

Healthcare Services has a three-year earnings growth rate of 11%. Its three-year Earnings Stability Factor is 3, signaling a rock-steady stream of profits.

In the past four quarters, the company’s earnings growth ranged from 8% to 14%, which is below the 25% threshold for growth stocks. But the firm’s sales growth has accelerated for four straight quarters, with the most recent quarter’s increase at 26%.

Analysts polled by Thomson Reuters see profit rising 18% to 66 cents a share this year, up from a 10% rise in 2011. Earnings are slated to increase 21% to 80 cents a share in 2013. That would mark a doubling of earnings from 2008.

Healthcare Services has no debt and about $56 million in cash and cash equivalents.


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