Indian Hotels (NSE:INDHOTEL) Has Announced That It Will Be Increasing Its Dividend To ₹1.75

The Indian Hotels Company Limited's (NSE:INDHOTEL) dividend will be increasing from last year's payment of the same period to ₹1.75 on 14th of July. The payment will take the dividend yield to 0.3%, which is in line with the average for the industry.

View our latest analysis for Indian Hotels

Indian Hotels' Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Indian Hotels' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 90.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 12%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹0.80 in 2014 to the most recent total annual payment of ₹1.75. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Indian Hotels has impressed us by growing EPS at 30% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Indian Hotels 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. For instance, we've picked out 1 warning sign for Indian Hotels that investors should take into consideration. 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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