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

Apollo Hospitals Enterprise Limited (NSE:APOLLOHOSP) will increase its dividend from last year's comparable payment on the 6th of September to ₹11.75. Despite this raise, the dividend yield of 0.3% is only a modest boost to shareholder returns.

View our latest analysis for Apollo Hospitals Enterprise

Apollo Hospitals Enterprise's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Apollo Hospitals Enterprise was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 59.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 10%, 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 annual payment back then was ₹4.00, compared to the most recent full-year payment of ₹11.75. This means that it has been growing its distributions at 11% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Apollo Hospitals Enterprise has seen EPS rising for the last five years, at 36% 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.

Apollo Hospitals Enterprise 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 of these factors considered, we think this has solid potential as a dividend 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 example, we've picked out 1 warning sign 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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