BioGaia's (STO:BIOG B) Upcoming Dividend Will Be Larger Than Last Year's

BioGaia AB (publ)'s (STO:BIOG B) dividend will be increasing to kr14.92 on 13th of May. This makes the dividend yield about the same as the industry average at 2.9%.

See our latest analysis for BioGaia

BioGaia Doesn't Earn Enough To Cover Its Payments

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, BioGaia was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 10.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 142%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from kr2.00 to kr3.63. This means that it has been growing its distributions at 6.1% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

BioGaia May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, BioGaia's EPS was effectively flat over the past five years, which could stop the company from paying more every year. If BioGaia is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On BioGaia's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. See if management have their own wealth at stake, by checking insider shareholdings in BioGaia stock. We have also put together a list of global stocks with a solid dividend.

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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.