SMS Lifesciences India (NSE:SMSLIFE) Has Affirmed Its Dividend Of ₹1.50

SMS Lifesciences India Limited's (NSE:SMSLIFE) investors are due to receive a payment of ₹1.50 per share on 29th of October. Including this payment, the dividend yield on the stock will be 0.3%, which is a modest boost for shareholders' returns.

View our latest analysis for SMS Lifesciences India

SMS Lifesciences India's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, SMS Lifesciences India was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 0.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 6.8%, which is in the range that makes us comfortable with the sustainability of the dividend.

SMS Lifesciences India's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The last annual payment of ₹1.50 was flat on the annual payment from4 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

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. However, SMS Lifesciences India's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If SMS Lifesciences India is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On SMS Lifesciences India's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for SMS Lifesciences India (of which 1 can't be ignored!) you should know about. 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.