Hindustan Unilever (NSE:HINDUNILVR) Will Pay A Larger Dividend Than Last Year At ₹24.00

Hindustan Unilever Limited's (NSE:HINDUNILVR) dividend will be increasing from last year's payment of the same period to ₹24.00 on 21st of July. The payment will take the dividend yield to 1.6%, which is in line with the average for the industry.

Check out our latest analysis for Hindustan Unilever

Hindustan Unilever's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Hindustan Unilever's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 30.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 81% which is a bit high but can definitely be sustainable.

Hindustan Unilever Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹12.00 in 2014, and the most recent fiscal year payment was ₹42.00. This means that it has been growing its distributions at 13% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Hindustan Unilever has seen EPS rising for the last five years, at 9.4% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Hindustan Unilever will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Hindustan Unilever that investors should take into consideration. Is Hindustan Unilever not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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