McKesson Corp. : MCK-US: Dividend Analysis : March 01st, 2017 (record date) : By the numbers : March 31, 2017

Our analysis is based on comparing McKesson Corp. with the following peers – Cardinal Health, Inc., AmerisourceBergen Corporation, Henry Schein, Inc., Allscripts Healthcare Solutions, Inc., Cerner Corporation, Computer Programs and Systems, Inc., Quality Systems, Inc., Owens & Minor, Inc., Patterson Companies, Inc. and Premier Inc. Class A (CAH-US, ABC-US, HSIC-US, MDRX-US, CERN-US, CPSI-US, QSII-US, OMI-US, PDCO-US and PINC-US).

McKesson Corp.’s dividend yield is 0.75 percent and its dividend payout is 12.49 percent. This compares to a peer average dividend yield of 1.58 percent and a payout level of 23.12 percent. This relatively lagging dividend performance could spur some dividend action going forward – as long as the company’s relatively strong dividend quality score of 92 out of a possible score of 100 looks sustainable.

Dividend Yield
Dividend Quality Score

Dividend Quality Overview

  • Over the last twelve months (prior to December 31, 2016), MCK-US paid a high quality dividend, which represents a yield of 0.75% at the current price.
  • Dividend quality trend has not been consistent over the last five years. Dividends were paid during each of these years — of these 4 were high quality and 1 was medium quality.
  • The ending cash balance, with a dividend coverage of 9.47x, provides a substantial cushion in case of a significant reduction of cash flows in the future.
Dividend Quality Score Vs Dividend Yield

Quadrant label definitions. Hover to know more

High Score;High Yield, High Score;Low Yield, Low Score;Low Yield, Low Score;High Yield

Dividend Coverage

Over the last twelve months (prior to December 31, 2016), MCK-US paid a high quality dividend.

The source of the company’s cash to support the dividend paid over the last twelve months is operating cash flow (coverage of 24.96x), investing cash flow (coverage of -19.25x), issuance cash flow (coverage of -8.15x) and twelve-month prior cash (coverage of 13.25x), for a total dividend coverage of 10.47x.

MCK-US‘s issuance cash flow includes outflows from net share buybacks (coverage of -10.11x). Thus, the total coverage including share buybacks is 20.58x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends.

Dividend Coverage by Cash Flow (TTM)

These coverage ratio factors imply that the firm’s dividends are wholly paid from operating and investing cash flows net of any debt repayments, which suggests a high dividend quality.

Dividend History

Item 2012-03-31 2013-03-31 2014-03-31 2015-03-31 2016-03-31 Latest
Dividend Yield (%) 0.95 0.79 0.52 0.43 0.69 0.75
Dividend Payout (%) 14.31 14.29 16.97 15.28 11.14 12.49

A complete list of metrics and analysis is available on the company page.

Company Profile

McKesson Corp. is a health services and information technology company, which provides medicines, pharmaceutical and care management products. It operates through the McKesson Distribution Solutions and McKesson Technology Solutions segments. The McKesson Distribution Solutions segment distributes ethical and proprietary drugs, medical-surgical supplies and equipment and health and beauty care products throughout North America. This segment also provides specialty pharmaceutical solutions for biotech and pharmaceutical manufacturers, sells financial, operational and clinical solutions for pharmacies. The McKesson Technology Solutions segment provides software, automation, business services and consulting to hospitals, physician offices, imaging centers and home healthcare. It also provides interactive connectivity services that streamline clinical, financial and administrative communication between patients, providers, payers, pharmacies and financial institutions agencies and payers. The company was founded by John McKesson and Charles Olcott in 1833 and is headquartered in Wilmington, DE.

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