Bayer CropScience (NSE:BAYERCROP) Is Due To Pay A Dividend Of ₹35.00

Bayer CropScience Limited's (NSE:BAYERCROP) investors are due to receive a payment of ₹35.00 per share on 13th of September. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

View our latest analysis for Bayer CropScience

Bayer CropScience's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 85% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 47.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 72%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹5.00 in 2014, and the most recent fiscal year payment was ₹140.00. This works out to be a compound annual growth rate (CAGR) of approximately 40% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Bayer CropScience Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Bayer CropScience has been growing its earnings per share at 16% a year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Bayer CropScience will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Bayer CropScience that investors should know about before committing capital to this stock. 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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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.

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