Lotus Eye Hospital and Institute's (NSE:LOTUSEYE) Dividend Will Be ₹0.50

The board of Lotus Eye Hospital and Institute Limited (NSE:LOTUSEYE) has announced that it will pay a dividend on the 25th of October, with investors receiving ₹0.50 per share. Based on this payment, the dividend yield on the company's stock will be 0.6%, which is an attractive boost to shareholder returns.

See our latest analysis for Lotus Eye Hospital and Institute

Lotus Eye Hospital and Institute's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Lotus Eye Hospital and Institute was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 81% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share could rise by 24.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 20% by next year, which we think can be pretty sustainable going forward.

Lotus Eye Hospital and Institute's Dividend Has Lacked Consistency

Looking back, Lotus Eye Hospital and Institute's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The last annual payment of ₹0.50 was flat on the annual payment from6 years ago. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Lotus Eye Hospital and Institute has been growing its earnings per share at 25% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Lotus Eye Hospital and Institute's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Lotus Eye Hospital and Institute has been making. We don't think Lotus Eye Hospital and Institute 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Lotus Eye Hospital and Institute 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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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.