Updated 3/6/25
Chemed Corporation (CHE) is a unique dividend stock that doesn’t fit the mold of a traditional income play, but that’s what makes it interesting. The company operates through two well-known businesses: VITAS Healthcare, a leader in hospice care, and Roto-Rooter, a household name in plumbing services. While these businesses might seem unrelated, together they create a diversified and resilient company that has consistently generated strong returns.
For investors focused on dividends, Chemed isn’t the first name that comes to mind. The yield is on the lower side, but there’s a bigger story here—one of steady growth, disciplined capital allocation, and financial strength. Let’s dive into its dividend profile, growth potential, financial health, and valuation to see why it deserves a closer look.
Key Dividend Metrics
📢 Dividend Yield: 0.34% (Low but consistent)
💰 Annual Dividend: $2.00 per share
📈 5-Year Average Yield: 0.29% (Gradual increase)
🔄 Dividend Growth Streak: Over 15 years of increases
⚡ Payout Ratio: 9.05% (Extremely low, meaning high reinvestment potential)
📅 Ex-Dividend Date: February 24, 2025
💸 Next Payment Date: March 14, 2025
Dividend Overview
Chemed doesn’t offer a high dividend yield, but what it does provide is reliability. At just 0.34%, the yield might not turn heads, but it’s backed by a history of consistent increases. More importantly, the company pays out a very small portion of its earnings—just 9.05%. This means dividends are well-covered, and there’s plenty of room for growth in the future.
Unlike companies that stretch themselves thin to maintain high yields, Chemed takes a conservative approach. This keeps the dividend safe and sustainable while allowing for steady increases over time. For investors who prioritize dividend safety over immediate income, that’s a major plus.
Dividend Growth and Safety
Chemed has built a reputation for rewarding shareholders without putting its financial health at risk. The company has been increasing its dividend for over 15 years, and there are no signs of that stopping.
A few factors make this dividend particularly secure:
✔ Strong cash flow—With $417.5 million in operating cash flow, there’s more than enough to fund dividends.
✔ Low debt—A debt-to-equity ratio of just 12.59% keeps financial risk in check.
✔ Stability—A beta of 0.43 means the stock moves less than the overall market, reducing volatility concerns.
The combination of low payout ratio, strong earnings, and disciplined financial management makes Chemed one of the more dependable dividend growers out there.
Chart Analysis
Price Movement and Trend
The price action for Chemed Corporation (CHE) shows a strong recent recovery after a period of consolidation. The stock had been trading in a range, struggling to break higher, but in the past few sessions, it made a significant push above both the 50-day and 200-day moving averages. The latest closing price of $594.35 puts it near the upper resistance area seen in previous months.
The stock’s recent high of $600.80 suggests a challenge at psychological resistance, while the low of $588.34 indicates buyers stepped in quickly on dips. The overall trend appears to be shifting from a period of weakness to one of strength, as seen in the moving averages.
Moving Averages
The 50-day moving average (orange) had been trending downward for a while, but it’s now curling upwards, suggesting potential momentum. The 200-day moving average (blue) has remained relatively flat but was recently tested from below. The stock’s break above both moving averages is often seen as a bullish signal, especially if sustained with continued volume support.
One thing to watch is whether the stock can maintain itself above these key levels or if this breakout is temporary. If it pulls back and retests these moving averages, it could either confirm support or signal a false breakout.
Volume and Buying Interest
Volume on the latest session came in at 119,157, which is relatively strong. There were previous spikes in volume during key moments, such as the sharp decline in October and the recovery in early March. Higher volume days generally indicate institutional activity, and the recent surge suggests that larger investors may be accumulating shares.
The red and green bars in the volume indicator show that while there have been selling pressure days, the most recent spike was accompanied by strong buying interest, which aligns with the price breakout. If this continues, it could further confirm a shift in sentiment.
Relative Strength Index (RSI)
The RSI, plotted at the bottom of the chart, has moved toward the higher end, indicating increased momentum. While it hasn’t yet reached overbought levels (above 70), it’s approaching that territory. This suggests that the stock has gained strength, but if it pushes too high too quickly, there could be a short-term pullback before resuming an upward trend.
The previous RSI lows in December and January coincided with the stock bottoming out, and since then, it has been trending upward, reflecting improving sentiment. However, if the RSI starts reversing sharply, it could indicate that the rally is losing steam.
Key Levels to Watch
The $600-$605 zone is an important resistance area. If the stock clears it with conviction and volume, it could open the door for further upside. On the downside, the $575-$580 area is a key level that could act as support, as it aligns with recent breakout points and the moving averages. A drop below that might shift sentiment back toward caution.
Analyst Ratings
📊 Chemed Corporation (CHE) has recently seen a mix of analyst upgrades and downgrades, reflecting both optimism and caution about its future performance.
📈 The average 12-month price target for Chemed is currently $663.67, with analysts projecting a range between $633 on the low end and $708 on the high end. This suggests a potential upside of about 18.38% from its latest closing price.
🔼 Upgrades and Increased Price Targets
🏦 Oppenheimer raised its price target for Chemed from $625 to $650 on February 29, 2024, maintaining an “Outperform” rating. This suggests confidence in the company’s ability to generate steady growth and navigate industry challenges effectively.
📊 Earlier, on March 4, 2024, RBC Capital increased its price target from $604 to $712, also keeping an “Outperform” rating. This adjustment likely came on the back of strong operational performance, financial discipline, and growth prospects within the healthcare and service sectors.
🔽 Downgrades and Lowered Price Targets
📉 More recently, on May 21, 2024, RBC Capital revised its outlook slightly downward, adjusting its price target from $712 to $697 while maintaining an “Outperform” rating. While this isn’t a downgrade in the traditional sense, the lower target suggests a more measured outlook due to potential headwinds.
📊 While these adjustments don’t signal a major shift in sentiment, they reflect the evolving expectations around the company’s ability to sustain its current trajectory in a changing economic landscape.
💡 Analysts remain largely positive on Chemed, but the range of price targets and adjustments suggests that while there is upside potential, there are also factors that could limit the pace of gains in the near term.
Earnings Report Summary
Chemed Corporation wrapped up its fourth quarter of 2024 with solid revenue growth, though its two main business segments had very different performances. The company, which owns VITAS Healthcare and Roto-Rooter, saw overall revenues climb to 640 million, up 9.2% from the previous year. However, while the healthcare side of the business surged ahead, Roto-Rooter faced some challenges.
VITAS Healthcare Sees Strong Growth
VITAS Healthcare, which provides hospice services, had a strong quarter. Revenue jumped 17.4% to 411 million, thanks to a higher patient count and an increase in admissions. The company’s daily patient census grew by 14.6%, and admissions rose by 3.5%, both key indicators of demand for hospice care.
One big driver behind this growth was an acquisition in April 2024. VITAS purchased the hospice assets and an assisted living facility from Covenant Health and Community Services, Inc. for 85 million. That deal contributed around 11 million to 12 million in additional revenue for the quarter.
Profitability also improved, with net income rising 10.5%, while adjusted EBITDA, a measure of earnings before interest, taxes, depreciation, and amortization, increased 11.8% to 93.2 million. However, the EBITDA margin dipped slightly, which could suggest some rising costs in the business.
Roto-Rooter Faces a Slower Quarter
Roto-Rooter, on the other hand, had a more difficult time. Revenue declined 2.9% to 229 million, and net income dropped 10.8%. Adjusted EBITDA fell by 7.2%, and margins were squeezed as well.
One reason for the dip could be a slight slowdown in demand for plumbing and drain services, which might be tied to broader economic conditions. On the bright side, the company was able to reduce some costs, particularly in internet marketing, which helped soften the decline.
Despite mixed results across its business segments, Chemed remains in a strong financial position. The company ended the year with 178.4 million in cash and no long-term debt, which gives it plenty of flexibility to invest in growth opportunities.
Chemed also continued returning capital to shareholders. During the quarter, it repurchased 388,235 shares for a total of 212.8 million, at an average price of 548.13 per share. There’s still about 255.3 million left in its share repurchase authorization, so buybacks could continue into the next year.
Overall, Chemed had a solid quarter, with VITAS Healthcare leading the way, while Roto-Rooter had a bit of a slowdown. With a strong balance sheet and ongoing share repurchases, the company is well-positioned to keep delivering value to its shareholders.
Financial Health and Stability
Chemed is in excellent financial shape. It operates efficiently, generates solid margins, and maintains a strong balance sheet.
Profitability metrics stand out:
✔ Profit Margin: 12.42%—Healthy for its industries
✔ Operating Margin: 17.86%—Shows strong efficiency
✔ Return on Equity (ROE): 27.12%—Indicates excellent capital allocation
On the balance sheet, the numbers are equally impressive:
✔ Total Cash: $178.35 million—A solid liquidity cushion
✔ Total Debt: $140.84 million—Minimal leverage compared to cash flow
✔ Current Ratio: 1.38—Strong short-term financial position
Chemed doesn’t just generate profits—it does so efficiently. A return on equity of over 27% is a sign that management knows how to deploy capital effectively, which bodes well for long-term dividend growth.
Valuation and Stock Performance
Chemed isn’t a cheap stock, but that’s often the case with high-quality businesses.
The company is trading at:
- 29.88x trailing earnings
- 23.92x forward earnings
- 3.71x sales
Those numbers suggest that while the stock is priced at a premium, investors are paying for reliability and growth.
Stock performance has been solid, with shares currently above both the 50-day ($550.52) and 200-day ($560.31) moving averages. The stock has fluctuated between a 52-week high of $654.62 and a low of $512.12, showing steady upward momentum. While valuation is something to keep in mind, the company’s financial strength justifies the higher multiples.
Risks and Considerations
No investment is without risk, and Chemed is no exception. While it offers financial stability and consistent returns, there are a few things investors should be aware of.
⚠️ Low Yield – At 0.34%, this is not a stock for income seekers. It’s more about long-term dividend growth than immediate cash flow.
⚠️ Regulatory Uncertainty – VITAS operates in the healthcare sector, where regulatory changes and Medicare reimbursement shifts could impact revenue.
⚠️ Valuation – The stock is trading at a premium. If growth slows or market sentiment shifts, there could be downside risk.
⚠️ Institutional Ownership – Nearly 97% of shares are held by institutions, meaning the stock’s price can be more sensitive to fund flows and portfolio adjustments by large investors.
Final Thoughts
Chemed Corporation is a high-quality dividend growth stock that prioritizes stability, efficiency, and shareholder returns. While the yield is modest, the company’s ability to generate strong cash flow, maintain a low payout ratio, and steadily increase dividends makes it a compelling choice for long-term investors.
This isn’t the right stock for those seeking high yields today, but for investors looking for consistent dividend growth backed by a strong financial foundation, Chemed is a company worth keeping an eye on.
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