EIH Associated Hotels' (NSE:EIHAHOTELS) Dividend Will Be Increased To ₹6.00

EIH Associated Hotels Limited (NSE:EIHAHOTELS) will increase its dividend from last year's comparable payment on the 31st of August to ₹6.00. This takes the dividend yield to 0.6%, which shareholders will be pleased with.

View our latest analysis for EIH Associated Hotels

EIH Associated Hotels' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, EIH Associated Hotels' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 16.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ₹1.00 total annually to ₹6.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. EIH Associated Hotels has seen EPS rising for the last five years, at 16% per annum. EIH Associated Hotels definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

EIH Associated Hotels Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that EIH Associated Hotels is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for EIH Associated Hotels that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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