Dr. Reddy's Laboratories (NSE:DRREDDY) Is Paying Out A Dividend Of ₹40.00

The board of Dr. Reddy's Laboratories Limited (NSE:DRREDDY) has announced that it will pay a dividend on the 28th of August, with investors receiving ₹40.00 per share. This means the dividend yield will be fairly typical at 0.7%.

View our latest analysis for Dr. Reddy's Laboratories

Dr. Reddy's Laboratories' Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Dr. Reddy's Laboratories' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 11.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 15%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dr. Reddy's Laboratories Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ₹18.00, compared to the most recent full-year payment of ₹40.00. This means that it has been growing its distributions at 8.3% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Dr. Reddy's Laboratories has impressed us by growing EPS at 24% per 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.

We Really Like Dr. Reddy's Laboratories' Dividend

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. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. 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 Dr. Reddy's Laboratories that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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