Kindred Healthcare (NYSE: KND) and Chemed (NYSE:CHE) are both healthcare companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Institutional & Insider Ownership

85.2% of Kindred Healthcare shares are held by institutional investors. Comparatively, 97.7% of Chemed shares are held by institutional investors. 3.0% of Kindred Healthcare shares are held by insiders. Comparatively, 4.9% of Chemed shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Kindred Healthcare and Chemed’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kindred Healthcare -8.06% 2.29% 0.30%
Chemed 4.62% 27.69% 15.16%

Dividends

Kindred Healthcare pays an annual dividend of $0.12 per share and has a dividend yield of 1.3%. Chemed pays an annual dividend of $1.12 per share and has a dividend yield of 0.4%. Kindred Healthcare pays out -6.1% of its earnings in the form of a dividend. Chemed pays out 24.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Chemed has raised its dividend for 9 consecutive years. Kindred Healthcare is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Kindred Healthcare and Chemed’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kindred Healthcare $7.22 billion 0.12 -$664.23 million ($1.97) -4.80
Chemed $1.58 billion 2.60 $108.74 million $4.50 57.01

Chemed has lower revenue, but higher earnings than Kindred Healthcare. Kindred Healthcare is trading at a lower price-to-earnings ratio than Chemed, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Kindred Healthcare and Chemed, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kindred Healthcare 1 4 1 0 2.00
Chemed 0 2 1 0 2.33

Kindred Healthcare presently has a consensus price target of $8.83, suggesting a potential downside of 6.53%. Chemed has a consensus price target of $228.50, suggesting a potential downside of 10.93%. Given Kindred Healthcare’s higher possible upside, equities research analysts clearly believe Kindred Healthcare is more favorable than Chemed.

Risk and Volatility

Kindred Healthcare has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500. Comparatively, Chemed has a beta of 1.16, indicating that its stock price is 16% more volatile than the S&P 500.

Summary

Chemed beats Kindred Healthcare on 11 of the 16 factors compared between the two stocks.

About Kindred Healthcare

Kindred Healthcare, Inc., incorporated on March 27, 1998, is a healthcare services company. The Company, through its subsidiaries, operates transitional care (TC) hospitals, a home health, hospice and community care business, inpatient rehabilitation hospitals (IRFs), a contract rehabilitation services business, nursing centers and assisted living facilities across the United States. The Company operates through divisions: the Kindred at Home division, the hospital division, the Kindred Rehabilitation Services division and the nursing center division. These divisions represent six segments: home health services, hospice services, hospitals, Kindred Hospital Rehabilitation Services, RehabCare and nursing centers. The home health services and hospice services operating segments are contained within the Kindred at Home division while the Kindred Hospital Rehabilitation Services and RehabCare operating segments are both contained within the Kindred Rehabilitation Services division.

About Chemed

Chemed Corporation purchases, operates and divests subsidiaries engaged in various business activities. The Company operates through two segments: the VITAS segment (VITAS) and the Roto-Rooter segment (Roto-Rooter). The Company’s VITAS provides hospice and palliative care services to its patients through a network of physicians, registered nurses, home health aides, social workers, clergy and volunteers. VITAS is the provider of hospice services in an industry dominated primarily by small, non-profit, community-based hospices. VITAS provides hospice care to Medicare beneficiaries participating in these managed care programs. A portion of its VITAS business is operated in the state of Florida. The Roto-Rooter segment provides plumbing, drain cleaning, water restoration and other related services to both residential and commercial customers.

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