Bioventix (LON:BVXP) Has Announced A Dividend Of £0.70

Bioventix PLC's (LON:BVXP) investors are due to receive a payment of £0.70 per share on 25th of April. This takes the dividend yield to 6.4%, which shareholders will be pleased with.

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Bioventix's Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share could rise by 3.4% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 117% over the next year.

See our latest analysis for Bioventix

Bioventix Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.24 in 2015, and the most recent fiscal year payment was £1.55. This means that it has been growing its distributions at 21% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 3.4% a year for the past five years, which isn't massive but still better than seeing them shrink. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Bioventix is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Bioventix that you should be aware of before investing. Is Bioventix 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.