Laurus Labs (NSE:LAURUSLABS) Is Paying Out Less In Dividends Than Last Year

The board of Laurus Labs Limited (NSE:LAURUSLABS) has announced it will be reducing its dividend by 50% from last year's payment of ₹0.80 on the 19th of November, with shareholders receiving ₹0.40. This means that the annual payment is 0.5% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Laurus Labs

Laurus Labs' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Laurus Labs' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 8.8%, which makes us pretty comfortable with the sustainability of the dividend.

Laurus Labs Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of ₹0.30 in 2017 to the most recent total annual payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Laurus Labs has seen EPS rising for the last five years, at 26% per annum. 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.

Laurus Labs Looks Like A Great Dividend Stock

Overall, we think that Laurus Labs could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Laurus Labs that you should be aware of before investing. 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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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.