Bayer CropScience (NSE:BAYERCROP) Is Paying Out A Dividend Of ₹35.00

The board of Bayer CropScience Limited (NSE:BAYERCROP) has announced that it will pay a dividend of ₹35.00 per share on the 20th of September. This means the annual payment is 1.9% of the current stock price, which is above the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bayer CropScience's stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Bayer CropScience's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 95.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 62% which brings it into quite a comfortable range.

View our latest analysis for Bayer CropScience

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹5.50 in 2015, and the most recent fiscal year payment was ₹125.00. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. 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.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 3.7% 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.

Bayer CropScience's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign for Bayer CropScience 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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