Hindustan Unilever (NSE:HINDUNILVR) Has Affirmed Its Dividend Of ₹24.00

Hindustan Unilever Limited (NSE:HINDUNILVR) will pay a dividend of ₹24.00 on the 30th of July. The dividend yield will be 1.8% based on this payment which is still above the industry average.

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Hindustan Unilever's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Hindustan Unilever was paying out a very large proportion of what it was earning and 95% 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 24.0%. If the dividend continues on its recent course, the payout ratio in 12 months could be 104%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Hindustan Unilever

Hindustan Unilever Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ₹13.50, compared to the most recent full-year payment of ₹43.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Hindustan Unilever has impressed us by growing EPS at 7.7% per year over the past five years. 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.

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 Hindustan Unilever's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Hindustan Unilever that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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