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

Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) has announced that on 19th of December, it will be paying a dividend of₹95.00, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 1.2% will still be comparable to other companies in the industry.

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

Procter & Gamble Hygiene and Health Care's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. At the time of the last dividend payment, Procter & Gamble Hygiene and Health Care was paying out a very large proportion of what it was earning and 149% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 62.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 88%, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹27.50 in 2014, and the most recent fiscal year payment was ₹195.00. This means that it has been growing its distributions at 22% 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.

Procter & Gamble Hygiene and Health Care'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. Procter & Gamble Hygiene and Health Care has impressed us by growing EPS at 10% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

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

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. We don't think Procter & Gamble Hygiene and Health Care is a great stock to add to your portfolio if income is your focus.

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 Procter & Gamble Hygiene and Health Care that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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