Dr. Reddy's Laboratories (NSE:DRREDDY) Will Pay 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. Based on this payment, the dividend yield will be 0.7%, which is fairly typical for the industry.

View our latest analysis for Dr. Reddy's Laboratories

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Dr. Reddy's Laboratories' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 11.6% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 15%, which is comfortable for the company to continue in the future.

Dr. Reddy's Laboratories Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ₹15.00 in 2014, and the most recent fiscal year payment was ₹40.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Dr. Reddy'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. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income 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. 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. Is Dr. Reddy's Laboratories not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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