Low interest rates have made it impossible to generate a reasonable income from bank accounts and term deposits. So, here are three health care companies paying big dividends right now.
Regis Healthcare Ltd (ASX: REG)
Regis Healthcare is one of Australia’s largest providers of aged care services with more than 6,000 residents calling Regis home. Across Australia, Regis owns and operates 63 aged care facilities that offer a range of healthcare support services including respite care, specialist dementia care and palliative care.
The Regis share price has fallen recently following its FY19 results, which showed the company was impacted by the recent aged care Royal Commission. Regis reported an 18% cut to dividends but the shares still trade on a fully-franked trailing dividend yield of 5.56%.
The Rask Finance video below explains dividends:
Although the dividend looks attractive now, the question is whether dividends can be maintained with FY20 results also expected to be impacted by the Royal Commission. I don’t know if I would buy today, but this is one company worth watching.
Estia Health Ltd (ASX: EHE)
Estia Health is a competitor of Regis and has been an aged care provider in Australia for nearly 50 years. The company currently operates 69 facilities across Australia.
Estia Health fared better than Regis in its FY19 result, reporting 7% revenue growth and net profit after tax (NPAT) in-line with the FY18 result. Importantly, Estia also reported a higher occupancy rate than Regis across its centres (93.6% versus 92.7%).
Estia managed to maintain its fully-franked dividend of 15.8 cents per share for the year, giving shares a trailing dividend yield of 6.08%.
Comparing Regis and Estia, my pick would have to be Estia right now.
Australian Pharmaceutical Industries Ltd (ASX: API)
Moving away from aged care, Australian Pharmaceuticals Industries is the parent company of Priceline Pharmacy, Soul Pattinson Chemist and Pharmacist Advice. Services provided by API include wholesale product delivery, retail services, marketing programs and business advisory services.
API reported modest growth in 1H19, with gross profit up 9.5% despite a 1.6% decline in revenue. Earnings before interest and tax (EBIT) grew by 5.8% and the fully-franked interim dividend was increased from 3.5 cents per share to 3.75 cps.
At the current share price, API shares provide a trailing dividend yield of 5.98%.
My Take
These dividend yields of around 6% are difficult to find on the ASX and typically come from banks. These three companies, although they have faced some challenges over the past year, all have growth opportunities with a growing and ageing population. Pleasingly, Estia and API, in particular, look like they will be able to maintain current dividends.
There are certainly risks to consider, especially around the impacts of the Royal Commission for Regis and Estia, but these are three companies that I think could be worth considering for their dividends.
For more proven dividend companies, have a look at the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
