UnitedHealth Group: Dividend hunters need to act fast

UnitedHealth Group shareholders should act swiftly if they want to benefit from the next dividend payment. The stock is approaching the ex-dividend date, which is one trading day before the record date. Only shareholders registered in the company's books on the record date are entitled to the dividend payment. This means that investors who acquire UnitedHealth Group shares on or after September 16 will not receive the dividend that will be paid on September 24. The company's next dividend payment is $2.10 per share. Over the past twelve months, the total payout was $8.40 per share, which results in a current dividend yield of 1.4% on the current share price of $588.42. Dividends, when reliably paid, can play a significant role in long-term investment returns. However, it is crucial to assess whether the dividend payments are also sustainable. UnitedHealth Group paid out 51% of its earnings to shareholders last year – a common rate for most companies. Though earnings provide an indication, cash flow is often more significant for dividend capacity. Last year, UnitedHealth paid 115% of its free cash flow as dividends, indicating a strained liquidity position. Although the dividends are covered by reported earnings, it is concerning that the cash flow cannot fully cover the payment. If this situation continues, it could be a warning sign for investors. As with many companies, rising profits are an indicator that future dividend increases are possible. Over the past five years, UnitedHealth's earnings per share have increased by 4.2% annually. While this growth rate is positive, the high payout of cash flow remains a critical issue. In the last decade, UnitedHealth Group has increased its dividend by an average of 22% per year. This is a positive signal that the company is willing to share growth with its shareholders, but investors must carefully monitor the company's long-term financial strength and cash flow situation. Considering these aspects, the question arises whether investors should invest in UnitedHealth Group. The company pays an appropriate percentage of its earnings but an uncomfortably high amount of its cash flow. The stable earnings growth is a positive sign, but the dividend capacity remains questionable. For risk-conscious investors, it is important to be aware of the risks associated with this business. UnitedHealth Group shows four warning signs in our investment analysis, one of which is particularly alarming. Recommended further reading: A complete list of high-yield dividend stocks.