EIH (NSE:EIHOTEL) Has Announced That It Will Be Increasing Its Dividend To ₹1.50

The board of EIH Limited (NSE:EIHOTEL) has announced that it will be paying its dividend of ₹1.50 on the 31st of August, an increased payment from last year's comparable dividend. This takes the dividend yield to 0.4%, which shareholders will be pleased with.

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EIH's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, EIH's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 35.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 9.7% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for EIH

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹1.10, compared to the most recent full-year payment of ₹1.50. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. EIH has seen EPS rising for the last five years, at 35% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

EIH Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for EIH that you should be aware of before investing. Is EIH 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.