Neuland Laboratories (NSE:NEULANDLAB) Will Pay A Larger Dividend Than Last Year At ₹14.00

Neuland Laboratories Limited's (NSE:NEULANDLAB) dividend will be increasing from last year's payment of the same period to ₹14.00 on 30th of August. This takes the annual payment to 0.2% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Neuland Laboratories

Neuland Laboratories' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Neuland Laboratories' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 40.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.1% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ₹1.20, compared to the most recent full-year payment of ₹14.00. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Neuland Laboratories has been growing its earnings per share at 78% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Neuland Laboratories' Dividend

Overall, a dividend increase is always good, and we think that Neuland Laboratories is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Neuland Laboratories that investors need to be conscious of moving forward. 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.