Procter & Gamble Hygiene and Health Care's (NSE:PGHH) Dividend Will Be Reduced To ₹95.00

Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) has announced that on 20th 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.

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

Procter & Gamble Hygiene and Health Care's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Procter & Gamble Hygiene and Health Care's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 149% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 52.7% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 94% which is a bit high but can definitely be sustainable.

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 2014, the annual payment back then was ₹27.50, compared to the most recent full-year payment of ₹195.00. This implies that the company grew its distributions at a yearly rate of about 22% 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.

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. 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, 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. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Procter & Gamble Hygiene and Health Care that investors should take into consideration. 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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