There's A Lot To Like About Fortis Healthcare's (NSE:FORTIS) Upcoming ₹1.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Fortis Healthcare Limited (NSE:FORTIS) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Fortis Healthcare's shares before the 25th of July in order to be eligible for the dividend, which will be paid on the 9th of September.

The company's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹1.00 per share to shareholders. Calculating the last year's worth of payments shows that Fortis Healthcare has a trailing yield of 0.1% on the current share price of ₹798.50. If you buy this business for its dividend, you should have an idea of whether Fortis Healthcare's dividend is reliable and sustainable. So we need to investigate whether Fortis Healthcare can afford its dividend, and if the dividend could grow.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortis Healthcare paid out just 9.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Fortis Healthcare generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.

It's positive to see that Fortis Healthcare's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Fortis Healthcare

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Fortis Healthcare's earnings have been skyrocketing, up 68% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Fortis Healthcare looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fortis Healthcare's dividend payments are effectively flat on where they were two years ago.

The Bottom Line

Is Fortis Healthcare worth buying for its dividend? Fortis Healthcare has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Wondering what the future holds for Fortis Healthcare? See what the 14 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.