Caplin Point Laboratories (NSE:CAPLIPOINT) Is Increasing Its Dividend To ₹2.00

The board of Caplin Point Laboratories Limited (NSE:CAPLIPOINT) has announced that the dividend on 11th of June will be increased to ₹2.00, which will be 33% higher than last year. This takes the annual payment to 0.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Caplin Point Laboratories

Caplin Point Laboratories' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Caplin Point Laboratories was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 12.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.7% by next year, which is in a pretty sustainable range.

Caplin Point Laboratories Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from ₹0.30 to ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Caplin Point Laboratories has grown earnings per share at 30% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Caplin Point Laboratories Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Caplin Point Laboratories 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Caplin Point Laboratories 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.