Marksans Pharma (NSE:MARKSANS) Is Increasing Its Dividend To ₹0.25

Marksans Pharma Limited (NSE:MARKSANS) has announced that it will be increasing its dividend on the 23rd of October to ₹0.25. Although the dividend is now higher, the yield is only 0.4%, which is below the industry average.

See our latest analysis for Marksans Pharma

Marksans Pharma's Payment Has Solid Earnings Coverage

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, Marksans Pharma was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 37.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 3.2% by next year, which we think can be pretty sustainable going forward.

Marksans Pharma's Dividend Has Lacked Consistency

Marksans Pharma has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from ₹0.10 to ₹0.25. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Marksans Pharma has impressed us by growing EPS at 38% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Marksans Pharma's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Marksans Pharma 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 performing dividend stock.

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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.
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