Glenmark Pharmaceuticals (NSE:GLENMARK) Has Announced A Dividend Of ₹2.50

Glenmark Pharmaceuticals Limited's (NSE:GLENMARK) investors are due to receive a payment of ₹2.50 per share on 27th of October. This payment means the dividend yield will be 0.7%, which is below the average for the industry.

Check out our latest analysis for Glenmark Pharmaceuticals

Glenmark Pharmaceuticals' Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Glenmark Pharmaceuticals' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 64.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 5.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

Glenmark Pharmaceuticals 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. Since 2012, the dividend has gone from ₹2.00 total annually to ₹2.50. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Glenmark Pharmaceuticals' EPS has declined at around 4.2% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Glenmark Pharmaceuticals' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 15 analysts we track are forecasting for the future. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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