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

Glenmark Pharmaceuticals Limited (NSE:GLENMARK) has announced that it will pay a dividend of ₹2.50 per share on the 29th of October. The dividend yield is 0.3% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Glenmark Pharmaceuticals

Glenmark Pharmaceuticals' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Glenmark Pharmaceuticals was paying a whopping 400% as a dividend, but this only made up 28% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 4.3%, so there isn't too much pressure on 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. The annual payment during the last 10 years was ₹2.00 in 2013, and the most recent fiscal year payment was ₹2.50. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Glenmark Pharmaceuticals' EPS has declined at around 18% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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 becomes a long term trend.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Glenmark Pharmaceuticals' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Glenmark Pharmaceuticals is a great stock to add to your portfolio if income is your focus.

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. For instance, we've picked out 2 warning signs for Glenmark Pharmaceuticals that investors should take into consideration. 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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