The Ensign Group, Inc.’s ( ENSG Quick Quote ENSG - Free Report) board of directors recently approved a 5% hike in the quarterly dividend in a bid to enhance shareholder value. With this approval, the payout now stands at 5.25 cents per share compared with the prior payout of 5 cents. Shares of Ensign Group have lost 4.3% on Dec 21.
The meatier dividend, which marked the 18th straight year of dividend hike, will be paid on Jan 31, 2021 to shareholders of record as on Dec 31, 2020.
Prior to this, the company had upped quarterly dividend by 5.3% to 5 cents per share in December last year.
Notably, the company has consistently paid dividends for the past 19 years. Based on the stock’s Dec 21 closing price of $72.89, the new dividend will yield 0.3%, better than the
industry average of 0.2%.
Apart from the regular dividend hike, Ensign Group, a leading provider of skilled nursing and assisted living services, also buys back shares. This March, the company’s board authorized two buyback programs each running through for a period of around 12 months, which has enabled it to buy back shares of up to $20 million and $5 million, respectively.
The entire authorized amount was utilized in buying back shares as a result of which both the repurchase programs expired in first-quarter 2020 itself.
However, it is worth mentioning that most of the companies across the United States barring a few have not been active on the buyback front due to the COVID-19 pandemic induced market volatilities and Ensign Group has been no exception to the trend. The company is of the opinion that maintaining cash position in the current scenario is of utmost importance and will resort to share buybacks once the economy starts recovering.
Furthermore, Ensign Group boasts of a strong liquidity standing, which not only mitigates balance sheet risks but also paves the way for undertaking prudent capital deployment measures. Also, strong cash flows have allowed the company to undertake several growth initiatives. Based on these, the company has been on an acquisition spree, which has reinforced its expertise in acquiring real estate or leasing out post-acute care operations and evolving those into market leaders. Notably, the company’s net cash provided by operating activities during the nine months of 2020 increased to more than two-fold when compared with the prior-year period.
The recent dividend hike further reinforces the company’s sound financial prospects. Ensign Group exited third-quarter 2020 with a sturdy cash balance of $175.4 million, which increased to nearly three-fold from 2019-end level.
Additionally, return on equity, a profitability measure to identify how efficient the company is in utilizing its shareholders fund, stands at 23.2% as of Sep 30, 2020, which compares favorably with the industry’s negative figure of 240%.
Shares of Ensign Group, which carries a Zacks Rank #3 (Hold), have surged 62.8% in a year compared with the industry’s rally of 22.5%. Moreover, we believe the company’s numerous growth initiatives and a robust balance sheet are likely to help the stock sustain its momentum in the days ahead.
Stocks to Consider
Some better-ranked stocks in the medical space are
Quidel Corporation ( QDEL Quick Quote QDEL - Free Report) , Ironwood Pharmaceuticals, Inc. ( IRWD Quick Quote IRWD - Free Report) and Acadia Healthcare Company, Inc. ( ACHC Quick Quote ACHC - Free Report) . While Quidel sports a Zacks Rank #1 (Strong Buy), Ironwood Pharmaceuticals and Acadia Healthcare carry a Zacks Rank #2 (Buy) at present. You can see . the complete list of today’s Zacks #1 Rank stocks here
Quidel, Ironwood Pharmaceuticals and Acadia Healthcare have a trailing four-quarter earnings surprise of 30.74%, 34.25% and 20.84%, on average, respectively.
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