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An early decision faced by newcomers to the wonderful world of individual stock investing pits plodding dividend paying stocks against high-flying growth stocks.
Decades ago many investors saw dividend payments as a vital sign of corporate health.  Overtime, more impatient investors looked for quicker returns from companies ploughing cash into expanding the company as opposed to dividend payments.  
Dividend payers are returning to investor favor, with graphs like the following from the US Investment Firms Convergence Investment Partners and Wilshire Associates serving as a rationale.

The US Russell 1000 Index represents about 92% of all stocks trading in the US and is the index of preference of many investment managers.  Note that low-yielding stocks underperform the market, on average, driving some retail investors to focus on high yields as the sole criterion for stock selection.  The obvious challenge is how best to pick dividend payers that outperform?  Eager investors find an abundance of advice on what to look for, which can be overwhelming and confusing.  Some “tip” lists are rendered less than helpful by a comprehensive list of criteria few stocks can meet in total.  Most include what seems to be advice in contradiction with other investing maxims.  Notably, why is it we are told repeatedly that past history is no guarantee of future performance in stock picking, and then warned to look for dividend payers with a multi-year history of not only making dividend payments, but increasing them annually?
The rationale for history is the likelihood of continuing dividend payments in the future.  However, a rigid application of this criterion excludes stocks just beginning dividend payments and those reducing dividends, sometimes because of conditions over which they have no control, like the GFC (Great Financial Crisis.)
The advice to look for high yielding stocks leaves the question how “high” is high, largely unanswered.  Dividend yield is a function of stock price, so stocks with declining share prices have higher yields.  However, declining stock prices with some evidence of potential for recovery can be ideal targets for bargain hunters.
One rarely stated bit of advice that passes the “common sense” test is to look for dividend payers in sectors notable for long term growth potential.  Analysts appear universal in the opinion that the ASX Telecommunications sector no longer has the explosive growth potential it had prior to consolidation of providers.  In contrast, no one doubts the long-term tailwinds propelling healthcare stocks.  The implication is that dividend payers in healthcare are more likely to generate sufficient revenue and profit to initiate and grow dividend payments while dividends in the Telco sector are more likely to stagnate and decline.
Aging populations and advances in healthcare are the “rising tides”; but not all “boats” in the sector should be considered equal.  Some offer products or services to a broader market than others.  A revolutionary treatment for a disease affecting a tiny fraction of the global population is less likely to grow dividends and appreciate share price than a treatment impacting a vast market. 
One bit of advice from some experts that appeals to common sense is the range of 5% to 10% for high yielding stocks.  Yields above 10% are more likely to be a result of steep declines in share price, although researching a stock can uncover plausible explanations for why the decline might be temporary.
The following table lists the four healthcare stocks with yields above 5%.  

In 2014 three new Aged Care operators came on to the ASX.  Two have high yields and respectable dividend history – Regis Healthcare (REG) and Japara Healthcare (JHC.)  The third, Estia Health (EHE) has a current yield of 2.5% and cut dividends from $0.242 in FY 2016 to $0.08 in FY 2017.
The growing number of Australian seniors eventually will no longer be able to live their daily lives without some form of assistance.  Retirement Village operators are there for Seniors still able to function independently with only moderate, if any, assistance needed.  Aged Care operators are there for those in need of personal maintenance, feeding help, and non-acute medical care.
Aged Care Operators receive government subsidies and pricing regulations with the inherent risk of funding cuts and pricing restrictions hovering over the share price.  Both Regis and Japara have seen wild swings in share price since listing on the ASX.

With a market cap of $1.04 billion, Regis is the biggest stock in our table.  The company now operates 57 Aged Care facilities, located primarily in urban areas.  In its first full year of operation as a listed company Regis reported revenues of $124 million and net profit after tax (NPAT) of $58 million.  Revenues rose in FY 2016 but NPAT dropped to $46 million.  Investors may have been impressed with the 33% profit increase to $61 million in FY 2017, but management warnings of changes to government funding schemes in FY 2018 and FY 2019 sent the stock price plummeting to a 52-week low of $3.22.  However, the company has seven new facilities under construction which will accommodate more than 1,300 residents. 
The company has grown both organically and by acquisition, with the latest – Presbyterian Care Tasmania – completed in August of this year.  Investors have been  abandoning this relatively new ASX stock on regulatory concerns, with no signs of changing sentiment.  Analysts, however, are bullish on the stock with a consensus OUTPEFERFORM rating on Regis, perhaps in recognition of the long-term potential.  Investors should bear in mind despite the strength of the Healthcare Sector, Regis is one of only four high yielding stocks in the sector, with a fully franked dividend.
Japara Healthcare adds Retirement Villages – 5 – to its 47 Aged Care facilities with identical concerns over government regulations and funding.  The company reported Full Year 2017 Financial Results a few days after rival Regis, showing a 10.7% increase in revenue but a decline in NPAT of 2.1%. Analysts are less enthusiastic about Japara, with a consensus HOLD rating.  However, Japara has a Price to Book Ratio of 0.88, which translates to a book value per share of $2.02.  The dividend is 70% franked. Payout ratios – percentage of earnings paid out in dividends – for both Japara and Regis are high at 100%.  Japara is of particular concern since operating cash flows declined from $37 million in FY 206 to $32 million this year while Regis saw its operating cash flow rise from $134 million to $151 million.  Although definitions of Payout Ratios universally state dividends come from earnings, they come out of operating cash flow.
Monash IVF Group Limited (MVF) is another 2014 entry to the ASX.  The company provides assisted reproductive technologies (AVT), which began back in 1977 with the world’s first in vitro fertilization (IVF) in the UK.  Today Monash provides a variety of ultrasound and other diagnostic obstetric and gynecological procedures and fertility treatments.  Monash operates in Australia with an international operation located in Malaysia.  
Full Year 2017 Financial Results showed a slight decline in revenue with a modest (2.9%) increase in NPAT. Reproductive services are expensive and prior to early 2017 Monash had only Virtus Health (VRT) as a competitor.  In February of this year Primary Healthcare (PRY) entered the market, offering “cut-rate” services.  This could impact Monash negatively, with an added concern arising in June when a key physician in the company resigned.  The Monash CEO had resigned in May.  The company warned the Doctor’s departure could have a financial impact on the company in 2019. A negative article in the Australian Financial Review claiming an “ongoing problem” between the company and its Doctors was refuted by Monash management in July. The share price has been in a steady decline since. 

Despite these concerns, analysts still have a consensus OUTPERFORM rating on MVF.
Sigma Healthcare (SIG) is in the pharmacy business, with both retail and wholesale operations.  The company’s five pharmacy brands offer health products ranging from cold and flu remedies to diabetes and heart health products.  Sigma also serves a network of independent pharmacies – more than 4,000 – providing not only product from its 13 distribution centres – but also a range of management, financial advisory, and operational services.  
Already facing stiff competition from Australian Pharmaceutical Industries (API), the company shocked investors with the news Sigma was beginning legal proceedings against one of its major wholesale customers for violation of a supply agreement.  The news came on 24 May and the stock price, already in decline, collapsed.

Half Year Results reported on 7 September calmed jittery investors to a degree, with a 16.7% increase in NPAT along with a 6.1% decline in revenue.  Management announced a continuation of its share buyback program and the acquisition of MPS, a provider of dose administration services to community pharmacies and the Aged Care sector. 
Investors briefly drove up the stock price but analysts, who had a consensus UNDERPEFORM rating prior to the release, appear unconvinced.  UBS maintained its SELL recommendation, keeping its target price at $0.70.  On the upside, Sigma has a new distribution centre under construction and with its 20% market share, the MPS acquisition will add to earnings for FY 2018.

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