Firstsource Solutions (NSE:FSL) Has Affirmed Its Dividend Of ₹3.50

Firstsource Solutions Limited's (NSE:FSL) investors are due to receive a payment of ₹3.50 per share on 4th of March. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Firstsource Solutions

Firstsource Solutions' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Firstsource Solutions' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 30.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Firstsource Solutions Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2018, the dividend has gone from ₹1.50 total annually to ₹3.50. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Firstsource Solutions has seen EPS rising for the last five years, at 11% per annum. Firstsource Solutions definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Firstsource Solutions Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Firstsource Solutions 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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