Dr. Reddy's Laboratories' (NSE:DRREDDY) Dividend Will Be Increased To ₹40.00

Dr. Reddy's Laboratories Limited (NSE:DRREDDY) has announced that it will be increasing its periodic dividend on the 26th of August to ₹40.00, which will be 33% higher than last year's comparable payment amount of ₹30.00. Despite this raise, the dividend yield of 0.7% is only a modest boost to shareholder returns.

See our latest analysis for Dr. Reddy's Laboratories

Dr. Reddy's Laboratories' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Dr. Reddy's Laboratories was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 8.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range.

Dr. Reddy's Laboratories Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from ₹13.75 total annually to ₹30.00. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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 Dr. Reddy's Laboratories has been growing its earnings per share at 36% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Dr. Reddy's Laboratories Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 36 analysts we track are forecasting for Dr. Reddy's Laboratories for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of 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.