Procter & Gamble Hygiene and Health Care's (NSE:PGHH) Dividend Is Being 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. This means that the annual payment will be 1.2% of the current stock price, which is in line with the average for the industry.

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

Procter & Gamble Hygiene and Health Care's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. 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.

Earnings per share is forecast to rise by 62.7% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹27.50 in 2014 to the most recent total annual payment of ₹195.00. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. 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

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. We are encouraged to see that Procter & Gamble Hygiene and Health Care has grown earnings per share at 10% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

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

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. Strong earnings growth means Procter & Gamble Hygiene and Health Care has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Procter & Gamble Hygiene and Health Care that you should be aware of before investing. 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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