Procter & Gamble Hygiene and Health Care (NSE:PGHH) Has Announced That It Will Be Increasing Its Dividend To ₹95.00

Procter & Gamble Hygiene and Health Care Limited's (NSE:PGHH) dividend will be increasing to ₹95.00 on 28th of February. This makes the dividend yield 2.1%, which is above the industry average.

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

Procter & Gamble Hygiene and Health Care Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was higher than its profits, and made up 77% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Over the next year, EPS could expand by 4.6% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 223%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was ₹22.50 in 2012, and the most recent fiscal year payment was ₹175. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year 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.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Procter & Gamble Hygiene and Health Care has only grown its earnings per share at 4.6% per annum over the past five years. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

Procter & Gamble Hygiene and Health Care's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Procter & Gamble Hygiene and Health Care will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Procter & Gamble Hygiene and Health Care that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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