Procter & Gamble Hygiene and Health Care (NSE:PGHH) Will Pay A Larger Dividend Than Last Year At ₹105.00

Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of December to ₹105.00. Even though the dividend went up, the yield is still quite low at only 1.0%.

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

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

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Procter & Gamble Hygiene and Health Care was paying out 89% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS is forecast to expand by 69.6%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 62% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was ₹22.50, compared to the most recent full-year payment of ₹185.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Could Be Constrained

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 seen EPS rising for the last five years, at 13% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Procter & Gamble Hygiene and Health Care's Dividend

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. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Procter & Gamble Hygiene and Health Care that investors need to be conscious of moving forward. Is Procter & Gamble Hygiene and Health Care not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.