Glenmark Pharmaceuticals (NSE:GLENMARK) Is Paying Out 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 0.1%, which is below the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Glenmark Pharmaceuticals' stock price has increased by 43% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Glenmark Pharmaceuticals

Glenmark Pharmaceuticals' Long-term Dividend Outlook appears Promising

If it is predictable over a long period, even low dividend yields can be attractive. Even in the absence of profits, Glenmark Pharmaceuticals is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 1.2%, so there isn't too much pressure on the dividend.

Glenmark Pharmaceuticals Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ₹2.00 in 2014 to the most recent total annual payment of ₹2.50. This means that it has been growing its distributions at 2.3% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 44% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

Glenmark Pharmaceuticals' Dividend Doesn't Look Sustainable

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. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. Is Glenmark Pharmaceuticals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.