Apollo Hospitals Enterprise Limited (NSE:APOLLOHOSP) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy Apollo Hospitals Enterprise Limited (NSE:APOLLOHOSP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Apollo Hospitals Enterprise's shares before the 16th of August in order to be eligible for the dividend, which will be paid on the 9th of September.

The company's next dividend payment will be ₹10.00 per share, on the back of last year when the company paid a total of ₹15.00 to shareholders. Based on the last year's worth of payments, Apollo Hospitals Enterprise stock has a trailing yield of around 0.2% on the current share price of ₹6587.85. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Apollo Hospitals Enterprise can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Apollo Hospitals Enterprise

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Apollo Hospitals Enterprise's payout ratio is modest, at just 26% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Apollo Hospitals Enterprise's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Apollo Hospitals Enterprise's earnings have been skyrocketing, up 30% per annum for the past five years. Apollo Hospitals Enterprise is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Apollo Hospitals Enterprise has delivered an average of 11% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Apollo Hospitals Enterprise? Apollo Hospitals Enterprise has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

Wondering what the future holds for Apollo Hospitals Enterprise? See what the 26 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.