Amrutanjan Health Care (NSE:AMRUTANJAN) Is Due To Pay A Dividend Of ₹2.60

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 the dividend yield will be fairly typical at 0.7%.

Check out our latest analysis for Amrutanjan Health Care

Amrutanjan Health Care's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Amrutanjan Health Care was paying only paying out a fraction of earnings, but the payment was a massive 129% of 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.

If the trend of the last few years continues, EPS will grow by 16.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹4.60. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Amrutanjan Health Care has been growing its earnings per share at 17% a 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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Amrutanjan Health Care is earning enough to cover the payments, the cash flows are lacking. 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. For example, we've picked out 1 warning sign for Amrutanjan Health Care that investors should know about before committing capital to this stock. Is Amrutanjan Health Care not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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