Colgate-Palmolive (India) (NSE:COLPAL) Is Due To Pay 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 23rd of November. This makes the dividend yield about the same as the industry average at 1.7%.

See our latest analysis for Colgate-Palmolive (India)

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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Colgate-Palmolive (India) was paying out quite a large proportion of both earnings and cash flow, with the dividend being 116% 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 27.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 102%, which probably can't continue without putting some pressure on the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹13.50 in 2014 to the most recent total annual payment of ₹52.00. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Colgate-Palmolive (India)'s Dividend Might Lack Growth

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 Colgate-Palmolive (India) has been growing its earnings per share at 13% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Colgate-Palmolive (India)'s Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Colgate-Palmolive (India)'s payments are rock solid. 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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Colgate-Palmolive (India) that investors should know about before committing capital to this stock. Is Colgate-Palmolive (India) 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.