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

The board of Medicamen Biotech Limited (NSE:MEDICAMEQ) has announced that it will pay a dividend on the 26th of October, with investors receiving ₹1.00 per share. The dividend yield is 0.2% 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 Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Medicamen Biotech is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 9.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 20%, which is definitely feasible to continue.

Medicamen Biotech's Dividend Has Lacked Consistency

Medicamen Biotech has been paying dividends for a while, but the track record isn't stellar. 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 7 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Medicamen Biotech's EPS has declined at around 9.4% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Medicamen Biotech's payments, as there could be some issues with sustaining them into the future. While Medicamen Biotech is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Medicamen Biotech (1 is potentially serious!) 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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