Amrutanjan Health Care's (NSE:AMRUTANJAN) Dividend Will Be ₹2.60

The board of Amrutanjan Health Care Limited (NSE:AMRUTANJAN) has announced that it will pay a dividend of ₹2.60 per share on the 23rd of October. Including this payment, the dividend yield on the stock will be 0.6%, which is a modest boost for shareholders' returns.

See our latest analysis for Amrutanjan Health Care

Amrutanjan Health Care's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Amrutanjan Health Care was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 10.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹1.50 in 2014 to the most recent total annual payment of ₹4.60. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Amrutanjan Health Care 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.

The Dividend Looks Likely To Grow

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. Amrutanjan Health Care has impressed us by growing EPS at 11% per year over the past five years. Amrutanjan Health Care definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Amrutanjan Health Care's Dividend

Overall, we like to see the dividend staying consistent, and we think Amrutanjan Health Care might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Amrutanjan Health Care that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.