Procter & Gamble Hygiene and Health Care's (NSE:PGHH) Dividend Will Be Increased To ₹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. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

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

Procter & Gamble Hygiene and Health Care's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. 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 we don't think that there are necessarily signs that the dividend might be unsustainable.

The next year is set to see EPS grow by 69.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend 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 means that it has been growing its distributions at 23% per annum over that time. Procter & Gamble Hygiene and Health Care has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Procter & Gamble Hygiene and Health Care has seen EPS rising for the last five years, at 13% per annum. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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 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. However, there are other things to consider for investors when analysing stock performance. 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.