Aster DM Healthcare (NSE:ASTERDM) Has Announced That Its Dividend Will Be Reduced To ₹1.00

Aster DM Healthcare Limited (NSE:ASTERDM) has announced that on 4th of October, it will be paying a dividend of₹1.00, which a reduction from last year's comparable dividend. The dividend yield of 0.8% is still a nice boost to shareholder returns, despite the cut.

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Aster DM Healthcare's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Aster DM Healthcare's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 378% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 155.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 32% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Aster DM Healthcare

Aster DM Healthcare Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

We Could See Aster DM Healthcare's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Aster DM Healthcare has seen EPS rising for the last five years, at 9.7% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Aster DM Healthcare's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Aster DM Healthcare is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Aster DM Healthcare that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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