RPG Life Sciences (NSE:RPGLIFE) Is Increasing Its Dividend To ₹12.00

RPG Life Sciences Limited (NSE:RPGLIFE) will increase its dividend from last year's comparable payment on the 3rd of September to ₹12.00. This takes the dividend yield to 1.3%, which shareholders will be pleased with.

View our latest analysis for RPG Life Sciences

RPG Life Sciences' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, RPG Life Sciences 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 38.1% 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 26% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹0.80 in 2013 to the most recent total annual payment of ₹12.00. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. RPG Life Sciences has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that RPG Life Sciences has been growing its earnings per share at 38% 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.

RPG Life Sciences Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for RPG Life Sciences that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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