Amrutanjan Health Care (NSE:AMRUTANJAN) Will 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 22nd of October. This payment means the dividend yield will be 0.6%, which is below the average for the industry.

See our latest analysis for Amrutanjan Health Care

Amrutanjan Health Care's Payment Has Solid Earnings Coverage

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 easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 22.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% 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 2012, 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. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Amrutanjan Health Care has seen EPS rising for the last five years, at 23% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Amrutanjan Health Care's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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 instance, we've picked out 1 warning sign for Amrutanjan Health Care that investors should take into consideration. 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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