Bioventix (LON:BVXP) Is Increasing Its Dividend To £0.62

Bioventix PLC (LON:BVXP) will increase its dividend on the 21st of April to £0.62, which is 19% higher than last year's payment from the same period of £0.52. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

View our latest analysis for Bioventix

Bioventix Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Bioventix's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 99% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next 12 months is set to see EPS grow by 1.3%. 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.

Bioventix Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was £0.121 in 2013, and the most recent fiscal year payment was £1.52. This means that it has been growing its distributions at 29% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Bioventix has seen EPS rising for the last five years, at 7.5% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Bioventix's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Bioventix is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Bioventix that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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