Abbott India's (NSE:ABBOTINDIA) Upcoming Dividend Will Be Larger Than Last Year's

Abbott India Limited (NSE:ABBOTINDIA) will increase its dividend from last year's comparable payment on the 8th of September to ₹325.00. This will take the annual payment to 1.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Abbott India

Abbott India's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Abbott India's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 80% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 36.4%. If the dividend continues on this path, the payout ratio could be 65% by next year, which we think can be pretty sustainable going forward.

Abbott India Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from ₹17.00 total annually to ₹325.00. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Abbott India has impressed us by growing EPS at 19% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Abbott India for free with public analyst estimates for the company. Is Abbott India 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.