Caplin Point Laboratories (NSE:CAPLIPOINT) Will Pay A Larger Dividend Than Last Year At ₹2.50

Caplin Point Laboratories Limited's (NSE:CAPLIPOINT) dividend will be increasing from last year's payment of the same period to ₹2.50 on 21st of October. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Caplin Point Laboratories' stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Caplin Point Laboratories

Caplin Point Laboratories' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, Caplin Point Laboratories' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 7.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.9% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹0.40, compared to the most recent full-year payment of ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. Caplin Point Laboratories has seen EPS rising for the last five years, at 22% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Caplin Point Laboratories Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Caplin Point Laboratories for free with public analyst estimates for the company. Is Caplin Point Laboratories not quite the opportunity you were looking for? Why not check out our selection of top 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.