Zota Health Care (NSE:ZOTA) Will Pay A Dividend Of ₹1.00

The board of Zota Health Care Limited (NSE:ZOTA) has announced that it will pay a dividend of ₹1.00 per share on the 28th of October. The dividend yield is 0.1% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Zota Health Care

Zota Health Care Might Find It Hard To Continue The Dividend

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even in the absence of profits, Zota Health Care is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS might fall by 70.3% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Zota Health Care'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 2018, the annual payment back then was ₹2.14, compared to the most recent full-year payment of ₹1.00. Dividend payments have fallen sharply, down 53% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Zota Health Care's EPS has declined at around 70% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of Zota Health Care's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. Taking the debate a bit further, we've identified 2 warning signs for Zota Health Care 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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