BioPharma Credit (LON:BPCR) Is Due To Pay A Dividend Of $0.0175

The board of BioPharma Credit PLC (LON:BPCR) has announced that it will pay a dividend of $0.0175 per share on the 15th of September. This makes the dividend yield 8.1%, which will augment investor returns quite nicely.

View our latest analysis for BioPharma Credit

BioPharma Credit's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by BioPharma Credit's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Earnings per share could rise by 31.6% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

BioPharma Credit's Dividend Has Lacked Consistency

Looking back, BioPharma Credit's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from $0.04 total annually to $0.07. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. BioPharma Credit might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. BioPharma Credit has impressed us by growing EPS at 32% per year over the past five years. BioPharma Credit is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like BioPharma Credit's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for BioPharma Credit that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.