Colgate-Palmolive (India) (NSE:COLPAL) Has Announced A Dividend Of ₹24.00

Colgate-Palmolive (India) Limited (NSE:COLPAL) has announced that it will pay a dividend of ₹24.00 per share on the 22nd of November. The dividend yield will be 2.2% based on this payment which is still above the industry average.

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Estimates Indicate Colgate-Palmolive (India)'s Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 25.8%. If the dividend continues on its recent course, the payout ratio in 12 months could be 97%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Colgate-Palmolive (India)

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ₹8.00, compared to the most recent full-year payment of ₹51.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year 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.

Colgate-Palmolive (India) May Have Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Colgate-Palmolive (India) has been growing its earnings per share at 8.6% a year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Colgate-Palmolive (India)'s payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think Colgate-Palmolive (India) is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Colgate-Palmolive (India) that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.