Bayer CropScience Limited (NSE:BAYERCROP) Is About To Go Ex-Dividend, And It Pays A 4.5% Yield

Bayer CropScience Limited (NSE:BAYERCROP) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Bayer CropScience's shares on or after the 12th of November will not receive the dividend, which will be paid on the 30th of November.

The company's next dividend payment will be ₹90.00 per share, and in the last 12 months, the company paid a total of ₹150 per share. Based on the last year's worth of payments, Bayer CropScience stock has a trailing yield of around 4.5% on the current share price of ₹3316.30. If you buy this business for its dividend, you should have an idea of whether Bayer CropScience's dividend is reliable and sustainable. As a result, readers should always check whether Bayer CropScience has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Bayer CropScience paying out a modest 36% of its earnings. A useful secondary check can be to evaluate whether Bayer CropScience generated enough free cash flow to afford its dividend. Over the past year it paid out 158% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While Bayer CropScience's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Bayer CropScience to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for Bayer CropScience

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Bayer CropScience, with earnings per share up 8.6% on average over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Bayer CropScience has increased its dividend at approximately 24% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Bayer CropScience got what it takes to maintain its dividend payments? Bayer CropScience has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you want to look further into Bayer CropScience, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 1 warning sign with Bayer CropScience and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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