La Opala RG's (NSE:LAOPALA) Shareholders Will Receive A Bigger Dividend Than Last Year

La Opala RG Limited (NSE:LAOPALA) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of October to ₹3.00. This will take the dividend yield to an attractive 1.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for La Opala RG

La Opala RG's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, La Opala RG's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 71.8% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

La Opala RG Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ₹0.35 in 2013, and the most recent fiscal year payment was ₹5.00. This means that it has been growing its distributions at 30% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that La Opala RG has been growing its earnings per share at 11% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for La Opala RG's prospects of growing its dividend payments in the future.

We Really Like La Opala RG's Dividend

Overall, a dividend increase is always good, and we think that La Opala RG is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for La Opala RG 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.