SMS Lifesciences India (NSE:SMSLIFE) Will Pay 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 30th of October. Including this payment, the dividend yield on the stock will be 0.2%, which is a modest boost for shareholders' returns.

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. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Unless the company can turn things around, EPS could fall by 7.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 2.0%, which is definitely feasible to continue.

SMS Lifesciences India's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The last annual payment of ₹1.50 was flat on the annual payment from3 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.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that SMS Lifesciences India's earnings per share has fallen at approximately 7.1% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

SMS Lifesciences India's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While SMS Lifesciences India is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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 example, we've identified 3 warning signs for SMS Lifesciences India (1 is concerning!) that you should be aware of before investing. Is SMS Lifesciences India not quite the opportunity you were looking for? Why not check out 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.