Amrutanjan Health Care (NSE:AMRUTANJAN) Has Announced A Dividend Of ₹2.60

The board of Amrutanjan Health Care Limited (NSE:AMRUTANJAN) has announced that it will pay a dividend of ₹2.60 per share on the 21st of October. This means that the annual payment will be 0.8% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Amrutanjan Health Care

Amrutanjan Health Care's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Amrutanjan Health Care's dividend was only 34% of earnings, however it was paying out 118% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 16.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut 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. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Amrutanjan Health Care has impressed us by growing EPS at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Amrutanjan Health Care that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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