Is It Worth Considering Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) is about to trade ex-dividend in the next three days. If you purchase the stock on or after the 10th of February, you won't be eligible to receive this dividend, when it is paid on the 2nd of March.

Procter & Gamble Hygiene and Health Care's next dividend payment will be ₹85.00 per share, and in the last 12 months, the company paid a total of ₹170 per share. Looking at the last 12 months of distributions, Procter & Gamble Hygiene and Health Care has a trailing yield of approximately 1.4% on its current stock price of ₹12356.6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Procter & Gamble Hygiene and Health Care

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year, Procter & Gamble Hygiene and Health Care paid out 93% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.

It's good to see that while Procter & Gamble Hygiene and Health Care's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Click here to see how much of its profit Procter & Gamble Hygiene and Health Care paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Procter & Gamble Hygiene and Health Care's earnings per share have risen 14% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Procter & Gamble Hygiene and Health Care has delivered 22% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Procter & Gamble Hygiene and Health Care an attractive dividend stock, or better left on the shelf? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Procter & Gamble Hygiene and Health Care is paying out so much of its profit. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

On that note, you'll want to research what risks Procter & Gamble Hygiene and Health Care is facing. Our analysis shows 1 warning sign for Procter & Gamble Hygiene and Health Care and you should be aware of this before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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