Bayer CropScience's (NSE:BAYERCROP) Dividend Will Be ₹25.00

The board of Bayer CropScience Limited (NSE:BAYERCROP) has announced that it will pay a dividend of ₹25.00 per share on the 11th of September. This means the annual payment will be 0.4% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Bayer CropScience

Bayer CropScience's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, the company was paying out 105% of what it was earning and 89% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

If the trend of the last few years continues, EPS will grow by 4.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Bayer CropScience Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from ₹4.00 to ₹115. This works out to be a compound annual growth rate (CAGR) of approximately 40% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Bayer CropScience May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 4.7% per year. The earnings growth is anaemic, and the company is paying out 105% of its profit. 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, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Bayer CropScience that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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