SMS Lifesciences India (NSE:SMSLIFE) Is Paying Out A 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. This means the annual payment will be 0.3% of the current stock price, which is lower than the industry average.

See our latest analysis for SMS Lifesciences India

SMS Lifesciences India's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, SMS Lifesciences India's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

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

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The payments haven't really changed that much since 4 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

SMS Lifesciences India May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. SMS Lifesciences India hasn't seen much change in its earnings per share over the last five years. While EPS growth is quite low, SMS Lifesciences India has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On SMS Lifesciences India's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SMS Lifesciences India's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For example, we've identified 4 warning signs for SMS Lifesciences India (1 shouldn't be ignored!) that you should be aware of before investing. 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.