Divi's Laboratories (NSE:DIVISLAB) Will Pay A Dividend Of ₹30.00

The board of Divi's Laboratories Limited (NSE:DIVISLAB) has announced that it will pay a dividend on the 27th of September, with investors receiving ₹30.00 per share. This means the annual payment is 0.8% of the current stock price, which is above the average for the industry.

View our latest analysis for Divi's Laboratories

Divi's Laboratories' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Divi's Laboratories' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 66.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Divi's Laboratories Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ₹7.50 in 2013, and the most recent fiscal year payment was ₹30.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Divi's Laboratories has seen EPS rising for the last five years, at 16% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Divi's Laboratories Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. For example, we've picked out 1 warning sign for Divi's Laboratories 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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