Advani Hotels & Resorts (India)'s (NSE:ADVANIHOTR) Dividend Will Be ₹0.90

Advani Hotels & Resorts (India) Limited (NSE:ADVANIHOTR) has announced that it will pay a dividend of ₹0.90 per share on the 20th of June. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

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Advani Hotels & Resorts (India)'s Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Advani Hotels & Resorts (India) was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share could rise by 18.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Advani Hotels & Resorts (India)

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ₹0.12 total annually to ₹1.80. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Advani Hotels & Resorts (India) has impressed us by growing EPS at 19% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Advani Hotels & Resorts (India)'s Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Advani Hotels & Resorts (India) has been making. We don't think Advani Hotels & Resorts (India) is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Advani Hotels & Resorts (India) (1 is a bit concerning!) that you should be aware of before investing. Is Advani Hotels & Resorts (India) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.