Laurus Labs (NSE:LAURUSLABS) Is Paying Out A Dividend Of ₹1.20

Laurus Labs Limited's (NSE:LAURUSLABS) investors are due to receive a payment of ₹1.20 per share on 27th of May. The dividend yield is 0.7% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Laurus Labs

Laurus Labs' 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, Laurus Labs was paying a whopping 2,880% as a dividend, but this only made up 14% 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.

Over the next year, EPS is forecast to expand by 47.4%. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

Laurus Labs Doesn't Have A Long Payment History

Laurus Labs' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the dividend has gone from ₹0.30 total annually to ₹2.00. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

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. 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Laurus Labs that investors should know about before committing capital to this stock. Is Laurus Labs not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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