Here's What We Like About Apollo Hospitals Enterprise's (NSE:APOLLOHOSP) Upcoming Dividend

Apollo Hospitals Enterprise Limited (NSE:APOLLOHOSP) stock is about to trade ex-dividend in 3 days. You can purchase shares before the 17th of September in order to receive the dividend, which the company will pay on the 5th of October.

Apollo Hospitals Enterprise's upcoming dividend is ₹2.75 a share, following on from the last 12 months, when the company distributed a total of ₹6.50 per share to shareholders. Looking at the last 12 months of distributions, Apollo Hospitals Enterprise has a trailing yield of approximately 0.3% on its current stock price of ₹1611.8. If you buy this business for its dividend, you should have an idea of whether Apollo Hospitals Enterprise's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Apollo Hospitals Enterprise

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Apollo Hospitals Enterprise has a low and conservative payout ratio of just 18% of its income after tax. A useful secondary check can be to evaluate whether Apollo Hospitals Enterprise generated enough free cash flow to afford its dividend. The good news is it paid out just 20% of its free cash flow in the last year.

It's positive to see that Apollo Hospitals Enterprise's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Apollo Hospitals Enterprise, with earnings per share up 6.0% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Apollo Hospitals Enterprise has lifted its dividend by approximately 4.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Apollo Hospitals Enterprise? Earnings per share growth has been growing somewhat, and Apollo Hospitals Enterprise is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Apollo Hospitals Enterprise is halfway there. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Apollo Hospitals Enterprise has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Apollo Hospitals Enterprise has 2 warning signs (and 1 which is potentially serious) we think you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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