Bayer CropScience's (NSE:BAYERCROP) Dividend Will Be Increased To ₹105.00

Bayer CropScience Limited (NSE:BAYERCROP) will increase its dividend on the 30th of November to ₹105.00, which is 5.0% higher than last year's payment from the same period of ₹100.00. This makes the dividend yield 2.5%, which is above the industry average.

Check out our latest analysis for Bayer CropScience

Bayer CropScience's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Bayer CropScience was paying out a very large proportion of what it was earning and 145% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 9.9%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 82% which is a bit high but can definitely be sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from ₹5.00 total annually to ₹130.00. This works out to be a compound annual growth rate (CAGR) of approximately 39% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Bayer CropScience has been growing its earnings per share at 18% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

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. While Bayer CropScience is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Bayer CropScience that investors should know about before committing capital to this stock. Is Bayer CropScience not quite the opportunity you were looking for? Why not check out our selection of top 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.