Dr. Reddy's Laboratories (NSE:DRREDDY) Is Increasing Its Dividend To ₹40.00

The board of Dr. Reddy's Laboratories Limited (NSE:DRREDDY) has announced that it will be paying its dividend of ₹40.00 on the 26th of August, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 0.8% is only a modest boost to shareholder returns.

Check out our latest analysis for Dr. Reddy's Laboratories

Dr. Reddy's Laboratories' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Looking forward, earnings per share is forecast to rise by 14.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dr. Reddy's Laboratories Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹13.75 in 2013, and the most recent fiscal year payment was ₹40.00. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Dr. Reddy's Laboratories has grown earnings per share at 36% per year over the past five years. 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.

We Really Like Dr. Reddy's Laboratories' Dividend

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 39 Dr. Reddy's Laboratories analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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