Procter & Gamble Hygiene and Health Care's (NSE:PGHH) Shareholders Will Receive A Smaller Dividend Than Last Year

Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) is reducing its dividend from last year's comparable payment to ₹95.00 on the 25th of December. The dividend yield will be in the average range for the industry at 1.2%.

Check out our latest analysis for Procter & Gamble Hygiene and Health Care

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

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. 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 60.3% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 90% - on the higher side, but we wouldn't necessarily say this is unsustainable.

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. 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 Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Procter & Gamble Hygiene and Health Care has impressed us by growing EPS 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.

The Dividend Could Prove To Be Unreliable

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. 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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. 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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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.