Bayer CropScience Limited (NSE:BAYERCROP) Will Pay A ₹90.00 Dividend In Three Days

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Bayer CropScience Limited (NSE:BAYERCROP) is about to go ex-dividend in just three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Bayer CropScience's shares on or after the 14th of November, you won't be eligible to receive the dividend, when it is paid on the 3rd of December.

The company's upcoming dividend is ₹90.00 a share, following on from the last 12 months, when the company distributed a total of ₹125 per share to shareholders. Based on the last year's worth of payments, Bayer CropScience has a trailing yield of 2.7% on the current stock price of ₹4591.90. If you buy this business for its dividend, you should have an idea of whether Bayer CropScience's dividend is reliable and sustainable. As a result, readers should always check whether Bayer CropScience has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Bayer CropScience paying out a modest 26% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out an unsustainably high 218% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Bayer CropScience intends to continue funding this dividend, or if it could be forced to cut the payment.

While Bayer CropScience's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Bayer CropScience to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

View our latest analysis for Bayer CropScience

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Bayer CropScience earnings per share are up 5.1% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Bayer CropScience has increased its dividend at approximately 32% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Bayer CropScience got what it takes to maintain its dividend payments? Bayer CropScience delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 218% of its cash flow over the last year, which is a mediocre outcome. In summary, it's hard to get excited about Bayer CropScience from a dividend perspective.

If you're not too concerned about Bayer CropScience's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To help with this, we've discovered 1 warning sign for Bayer CropScience that you should be aware of before investing in their shares.

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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.