Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bioventix PLC (LON:BVXP) is about to trade ex-dividend in the next four days. You can purchase shares before the 29th of October in order to receive the dividend, which the company will pay on the 13th of November.
Bioventix's next dividend payment will be UK£1.05 per share, and in the last 12 months, the company paid a total of UK£1.26 per share. Last year's total dividend payments show that Bioventix has a trailing yield of 3.3% on the current share price of £42.1. If you buy this business for its dividend, you should have an idea of whether Bioventix's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
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. Bioventix paid out 63% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (89%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's positive to see that Bioventix's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Bioventix's earnings have been skyrocketing, up 22% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Bioventix has delivered an average of 28% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is Bioventix worth buying for its dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Bioventix's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 63% and 89% respectively. Overall, it's hard to get excited about Bioventix from a dividend perspective.
Keen to explore more data on Bioventix's financial performance? Check out our visualisation of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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