Sisram Medical Ltd's (HKG:1696) dividend is being reduced from last year's payment covering the same period to $0.126 on the 9th of September. This payment takes the dividend yield to 2.0%, which only provides a modest boost to overall returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Sisram Medical's stock price has increased by 60% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Sisram Medical's Projections Indicate Future Payments May Be Unsustainable

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Sisram Medical's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Earnings per share is forecast to rise by 22.4% over the next year. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

See our latest analysis for Sisram Medical

Sisram Medical's Dividend Has Lacked Consistency

Looking back, Sisram Medical's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the dividend has gone from $0.013 total annually to $0.0161. This means that it has been growing its distributions at 3.6% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 2.7% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Sisram Medical has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Sisram Medical's Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Sisram Medical for free with public analyst estimates for the company. 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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