Apollo Hospitals Enterprise's (NSE:APOLLOHOSP) Dividend Is Being Reduced To ₹9.00

Apollo Hospitals Enterprise Limited's (NSE:APOLLOHOSP) dividend is being reduced from last year's payment covering the same period to ₹9.00 on the 27th of September. However, the dividend yield of 0.3% still remains in a typical range for the industry.

View our latest analysis for Apollo Hospitals Enterprise

Apollo Hospitals Enterprise's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Apollo Hospitals Enterprise was paying only paying out a fraction of earnings, but the payment was a massive 104% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 141.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from ₹5.50 total annually to ₹18.00. This means that it has been growing its distributions at 13% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Apollo Hospitals Enterprise has seen EPS rising for the last five years, at 47% per annum. 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.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Apollo Hospitals Enterprise that you should be aware of before investing. Is Apollo Hospitals Enterprise not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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