Biocon (NSE:BIOCON) Will Pay A Dividend Of ₹0.50

The board of Biocon Limited (NSE:BIOCON) has announced that it will pay a dividend on the 5th of September, with investors receiving ₹0.50 per share. This payment means the dividend yield will be 0.1%, which is below the average for the industry.

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Biocon's Future Dividend Projections Appear Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Biocon's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 87.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 3.1%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Biocon

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 ₹0.833 in 2015, and the most recent fiscal year payment was ₹0.50. Doing the maths, this is a decline of about 5.0% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Biocon has impressed us by growing EPS at 5.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Biocon's prospects of growing its dividend payments in the future.

Our Thoughts On Biocon's Dividend

Overall, a consistent dividend is a good thing, and we think that Biocon has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Biocon that you should be aware of before investing. 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.