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

The board of Abbott India Limited (NSE:ABBOTINDIA) has announced that it will be paying its dividend of ₹410.00 on the 7th of September, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 1.5%, providing a nice boost to shareholder returns.

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. Before this announcement, Abbott India was paying out 73% of earnings, but a comparatively small 75% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 34.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 68%, which is in the range that makes us comfortable with the sustainability of the dividend.

Abbott India Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ₹18.00 in 2014 to the most recent total annual payment of ₹410.00. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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 22% per year over the past five years. However, Abbott India isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Abbott India Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

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