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 of ₹60.00 per share on the 4th of January. This will take the annual payment to 2.2% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Procter & Gamble Health

Procter & Gamble Health's Future Dividends May Potentially Be At Risk

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Procter & Gamble Health was paying out quite a large proportion of both earnings and cash flow, with the dividend being 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

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ₹8.50, compared to the most recent full-year payment of ₹120.00. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. 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.

Procter & Gamble Health Could Grow Its Dividend

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. It's encouraging to see that Procter & Gamble Health has been growing its earnings per share at 7.6% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Procter & Gamble Health will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

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 Procter & Gamble Health that investors should know about before committing capital to this stock. Is Procter & Gamble Health not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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