Glenmark Pharmaceuticals Limited (NSE:GLENMARK) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy Glenmark Pharmaceuticals Limited (NSE:GLENMARK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Glenmark Pharmaceuticals investors that purchase the stock on or after the 31st of August will not receive the dividend, which will be paid on the 11th of October.

The company's next dividend payment will be ₹2.50 per share. Last year, in total, the company distributed ₹5.00 to shareholders. Looking at the last 12 months of distributions, Glenmark Pharmaceuticals has a trailing yield of approximately 0.2% on its current stock price of ₹2438.30. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Glenmark Pharmaceuticals has a low and conservative payout ratio of just 3.9% of its income after tax. A useful secondary check can be to evaluate whether Glenmark Pharmaceuticals generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 6.8% of its cash flow last year.

It's positive to see that Glenmark Pharmaceuticals's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Glenmark Pharmaceuticals

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Glenmark Pharmaceuticals's earnings per share have risen 13% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Glenmark Pharmaceuticals has lifted its dividend by approximately 9.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Glenmark Pharmaceuticals an attractive dividend stock, or better left on the shelf? Glenmark Pharmaceuticals has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Glenmark Pharmaceuticals for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Glenmark Pharmaceuticals you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.