AstraZeneca Pharma India (NSE:ASTRAZEN) Is Increasing Its Dividend To ₹32.00

AstraZeneca Pharma India Limited (NSE:ASTRAZEN) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of January to ₹32.00. Even though the dividend went up, the yield is still quite low at only 0.3%.

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AstraZeneca Pharma India's Projections Indicate Future Payments May Be Unsustainable

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, AstraZeneca Pharma India's dividend was only 69% of earnings, however it was paying out 126% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 9.9% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 112%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for AstraZeneca Pharma India

AstraZeneca Pharma India's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2019, the annual payment back then was ₹2.00, compared to the most recent full-year payment of ₹32.00. This works out to be a compound annual growth rate (CAGR) of approximately 59% a year over that time. AstraZeneca Pharma India has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

AstraZeneca Pharma India Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that AstraZeneca Pharma India has grown earnings per share at 9.9% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think AstraZeneca Pharma India will make a great income stock. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for AstraZeneca Pharma India (of which 1 shouldn't be ignored!) you should know about. Is AstraZeneca Pharma 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.