Indian Hotels' (NSE:INDHOTEL) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of The Indian Hotels Company Limited (NSE:INDHOTEL) has announced that it will be paying its dividend of ₹1.75 on the 14th of July, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 0.3%, which is fairly typical for the industry.

Check out our latest analysis for Indian Hotels

Indian Hotels' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Indian Hotels' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 90.8%. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ₹0.80 total annually to ₹1.75. This means that it has been growing its distributions at 8.1% per annum over that time. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Indian Hotels has impressed us by growing EPS at 30% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Indian Hotels Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

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. As an example, we've identified 1 warning sign for Indian Hotels that you should be aware of before investing. Is Indian Hotels not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.