Apollo Hospitals Enterprise (NSE:APOLLOHOSP) Is Increasing Its Dividend To ₹11.75

Apollo Hospitals Enterprise Limited (NSE:APOLLOHOSP) will increase its dividend on the 1st of January to ₹11.75. Although the dividend is now higher, the yield is only 0.3%, which is below the industry average.

View our latest analysis for Apollo Hospitals Enterprise

Apollo Hospitals Enterprise's Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Apollo Hospitals Enterprise's 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.

Looking forward, earnings per share is forecast to rise by 2.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, 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. Since 2012, the dividend has gone from ₹3.75 to ₹11.75. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Apollo Hospitals Enterprise has been growing its earnings per share at 36% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Apollo Hospitals Enterprise's Dividend

Overall, a dividend increase is always good, and we think that Apollo Hospitals Enterprise is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Apollo Hospitals Enterprise that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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