Procter & Gamble Hygiene and Health Care's (NSE:PGHH) Upcoming Dividend Will Be Larger Than Last Year's

Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) will increase 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%.

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

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

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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 is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Over the next year, EPS is forecast to expand by 17.7%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 82% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from ₹22.50 total annually to ₹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.

Procter & Gamble Hygiene and Health Care's Dividend Might Lack Growth

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. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

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. 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 don't think Procter & Gamble Hygiene and Health Care is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 1 warning sign for Procter & Gamble Hygiene and Health Care that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.