Amrutanjan Health Care (NSE:AMRUTANJAN) Has Announced A Dividend Of ₹1.00

The board of Amrutanjan Health Care Limited (NSE:AMRUTANJAN) has announced that it will pay a dividend of ₹1.00 per share on the 16th of March. Including this payment, the dividend yield on the stock will be 0.7%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Amrutanjan Health Care

Amrutanjan Health Care's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Amrutanjan Health Care was paying a whopping 120% as a dividend, but this only made up 32% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

If the trend of the last few years continues, EPS will grow by 20.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

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. The annual payment during the last 10 years was ₹1.50 in 2013, and the most recent fiscal year payment was ₹4.60. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Amrutanjan Health Care has grown earnings per share at 20% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Amrutanjan Health Care's payments, as there could be some issues with sustaining them into the future. While Amrutanjan Health Care is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Amrutanjan Health Care that investors should know about before committing capital to this stock. 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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