Procter & Gamble Health (NSE:PGHL) Has Announced A Dividend Of ₹60.00

The board of Procter & Gamble Health Limited (NSE:PGHL) has announced that it will pay a dividend on the 4th of January, with investors receiving ₹60.00 per share. This will take the dividend yield to an attractive 2.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Procter & Gamble Health

Procter & Gamble Health Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. At the time of the last dividend payment, Procter & Gamble Health was paying out a very large proportion of what it was earning and 96% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

EPS is set to grow by 7.6% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 240%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹8.50 in 2014 to the most recent total annual payment of ₹120.00. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. Procter & Gamble Health 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.

Procter & Gamble Health Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Procter & Gamble Health has impressed us by growing EPS at 7.6% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Procter & Gamble Health's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Procter & Gamble Health that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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