Dr. Lal PathLabs Limited (NSE:LALPATHLAB) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy Dr. Lal PathLabs Limited (NSE:LALPATHLAB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Dr. Lal PathLabs' shares before the 5th of November in order to be eligible for the dividend, which will be paid on the 22nd of November.

The company's next dividend payment will be ₹6.00 per share, and in the last 12 months, the company paid a total of ₹18.00 per share. Calculating the last year's worth of payments shows that Dr. Lal PathLabs has a trailing yield of 0.6% on the current share price of ₹3113.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Dr. Lal PathLabs

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Dr. Lal PathLabs paid out 62% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Dr. Lal PathLabs's earnings per share have been growing at 15% a year for the past five years. Dr. Lal PathLabs has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, Dr. Lal PathLabs has increased its dividend at approximately 28% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Dr. Lal PathLabs an attractive dividend stock, or better left on the shelf? Dr. Lal PathLabs's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Dr. Lal PathLabs looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Dr. Lal PathLabs for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Dr. Lal PathLabs you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.