Apollo Hospitals Enterprise's (NSE:APOLLOHOSP) Shareholders Will Receive A Smaller Dividend Than Last Year

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. This means that the annual payment will be 0.4% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Apollo Hospitals Enterprise

Apollo Hospitals Enterprise's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Apollo Hospitals Enterprise was paying a whopping 104% as a dividend, but this only made up 26% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

The next year is set to see EPS grow by 136.6%. 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

Although the company has a long dividend history, it has been cut at least once 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. Apollo Hospitals Enterprise has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 impressed us by growing EPS at 47% per year over the past five years. 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.

Our Thoughts On Apollo Hospitals Enterprise's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Apollo Hospitals Enterprise is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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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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.