Krsnaa Diagnostics (NSE:KRSNAA) Will Pay A Larger Dividend Than Last Year At ₹2.75

Krsnaa Diagnostics Limited's (NSE:KRSNAA) dividend will be increasing from last year's payment of the same period to ₹2.75 on 25th of October. This will take the annual payment to 0.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Krsnaa Diagnostics

Krsnaa Diagnostics' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Krsnaa Diagnostics' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 152.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 5.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

Krsnaa Diagnostics Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

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. We are encouraged to see that Krsnaa Diagnostics has grown earnings per share at 25% per 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.

Our Thoughts On Krsnaa Diagnostics' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Krsnaa Diagnostics' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Krsnaa Diagnostics that investors should take into consideration. 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.