Dr. Reddy's Laboratories (NSE:DRREDDY) Is Paying Out A Larger Dividend Than Last Year

Dr. Reddy's Laboratories Limited (NSE:DRREDDY) will increase its dividend from last year's comparable payment on the 26th of August to ₹40.00. This takes the annual payment to 0.9% of the current stock price, which is about average for the industry.

View our latest analysis for Dr. Reddy's Laboratories

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

We aren't too impressed by dividend yields unless they can be sustained over time. 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.

Over the next year, EPS is forecast to expand by 13.9%. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

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. Since 2013, the dividend has gone from ₹13.75 total annually to ₹40.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Dr. Reddy's Laboratories has seen EPS rising for the last five years, at 36% per annum. 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, a dividend increase is always good, and we think that Dr. Reddy's Laboratories is a strong income stock thanks to its track record and growing earnings. 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.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 39 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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