Laurus Labs (NSE:LAURUSLABS) Has Affirmed Its Dividend Of ₹0.80

The board of Laurus Labs Limited (NSE:LAURUSLABS) has announced that it will pay a dividend on the 27th of November, with investors receiving ₹0.80 per share. This payment means the dividend yield will be 0.4%, which is below the average for the industry.

View our latest analysis for Laurus Labs

Laurus Labs' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Laurus Labs' dividend was only 10% of earnings, however it was paying out 243% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 22.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Laurus Labs Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2017, the first annual payment was ₹0.30, compared to the most recent full-year payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 61% over that duration. Laurus Labs has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Laurus Labs has impressed us by growing EPS at 36% per year over the past five years. 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.

Our Thoughts On Laurus Labs' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Laurus Labs is earning enough to cover the payments, the cash flows are lacking. We don't think Laurus Labs is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 4 warning signs for Laurus Labs that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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.

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