Medicamen Biotech (NSE:MEDICAMEQ) Will Pay A Dividend Of ₹1.00

Medicamen Biotech Limited's (NSE:MEDICAMEQ) investors are due to receive a payment of ₹1.00 per share on 27th of October. The dividend yield is 0.1% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Medicamen Biotech

Medicamen Biotech's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Medicamen Biotech's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 5.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 9.6% by next year, which we think can be pretty sustainable going forward.

Medicamen Biotech's Dividend Has Lacked Consistency

It's comforting to see that Medicamen Biotech has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The most recent annual payment of ₹1.00 is about the same as the annual payment 6 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Medicamen Biotech has been growing its earnings per share at 5.1% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Medicamen Biotech's prospects of growing its dividend payments in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Medicamen Biotech is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Medicamen Biotech 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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