Last update on 2024-06-27

Bio-Techne (TECH) - Dividend Analysis (Final Score: 5/8)

Comprehensive analysis of Bio-Techne (TECH) dividend stability using an 8-criteria scoring system. Find out if Bio-Techne maintains a strong dividend policy.

Short Analysis - Dividend Score: 5

We're running Bio-Techne (TECH) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Bio-Techne (TECH) was evaluated based on 8 criteria to assess its dividend performance and stability. The overall dividend score is 5. It has a current dividend yield of 0.4147%, higher than the industry average but on a downward trend. The company's average annual dividend growth rate over the past 20 years has been higher than 5%, although the payments have been inconsistent. The payout ratio averages around 101.14%, which is unsustainably high. Initially, the dividends were well covered by earnings, but recent years have shown a significant drop in coverage. The dividend coverage by cash flow shows some stability, though it is also declining. The company has been paying dividends since 2008 but not for over 25 years. Bio-Techne has had fluctuating stock repurchases, mostly positive but not consistent.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Bio-Techne shows some strengths in its dividend yield and growth rate against the industry average. However, the high payout ratio, inconsistent dividend payments, and recent downward trends in dividend coverage by earnings and cash flow are concerns. If you're looking for reliable and stable dividend income, Bio-Techne may not be the ideal choice. It might be worth looking into more stable dividend stocks unless you believe in their long-term growth and potential to stabilize their dividend policies.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a measure of how much a company pays out in dividends each year relative to its stock price. It represents the return on investment for a stock based solely on the dividend and is important for income-focused investors.

Bio-Techne's current dividend yield of 0.4147% is significantly higher than the industry average of 0.08%. Historically, the dividend yield was much higher during the years 2009-2013. The decline in recent years indicates that the company's stock price has appreciated faster than the dividend per share. While currently above industry average, prolonged decline might be concerning if investors are primarily seeking higher yields. Bio-Techne's ability to maintain a yield above the industry average is a positive sign, but historical context shows a downward trend that needs monitoring. With dividend yields moving from a high of 6% in 2012 to the current 0.4147%, the overall return for dividend-seeking investors might have decreased despite industry outperformance.

Average annual Growth Rate higher than 5% in the last 20 years?

Criterion 1.1 evaluates whether the Dividend Growth Rate has been higher than 5% in the past 20 years. This is important because a consistently high dividend growth rate indicates that a company is financially healthy and generating enough profit to return value to its shareholders routinely.

With an average dividend ratio of 10.99%, it seems that Bio-Techne had sporadic dividend payments over the last 20 years, with some significant positives and negatives in certain years. For example, in 2009 there was a value of 304, and in recent years, particularly 2021 and 2022, the dividend values were negative, -37.5 and -60 respectively. This inconsistency in dividend payouts shows volatility, making it challenging to consider this trend as robust or sustainable. Despite the average being above 5%, the erratic nature of these dividends suggests that caution is warranted in viewing Bio-Techne as a reliably dividend-growing stock.

Average annual Payout Ratio lower than 65% in the last 20 years?

Criterion 1.2 looks at the average payout ratio of a company over the past 20 years. The payout ratio is defined as the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. A lower payout ratio (generally below 65%) is preferred because it indicates that the company is retaining a significant portion of its earnings to reinvest in the business, sustain future growth, and cushion against adverse market conditions. Companies with a high payout ratio may be viewed as riskier because they have less capacity to reinvest in growth and may have reduced financial flexibility. Therefore, maintaining a lower average payout ratio demonstrates prudent financial management and a strategy focused on long-term sustainability and value creation for shareholders.

The average payout ratio for Bio-Techne (TECH) over the past 20 years is approximately 101.14%, notably above the preferred threshold of 65%. This high payout ratio is concerning for several reasons. Primarily, it indicates that Bio-Techne is paying out more than its earnings in dividends, which is unsustainable over the long term. Reviewing the specific yearly data, from 2009 onwards, the payout ratio consistently exceeds 100%, peaking at 252.37% in 2017. Such high payout ratios suggest that Bio-Techne might be using its retained earnings or even taking on debt to meet its dividend commitments. This could limit the company's ability to reinvest in R&D and growth initiatives, which are crucial for a biotech firm's competitive edge and innovation capacity. Moreover, the payout ratio has significantly fluctuated, reaching as low as 0% in the early 2000s and as high as 252.37%, demonstrating a lack of consistent dividend policy. This inconsistency can be unsettling for investors looking for stable income and indicative of underlying financial challenges or strategic missteps. Therefore, in the context of Criterion 1.2, Bio-Techne does not meet the desirable standards for a low average payout ratio, and this trend is unfavorable for sustaining long-term dividends and growth.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that the company generates enough profit to pay dividends comfortably. This metric is important as it reflects the company's ability to sustain its dividend payments over the long term.

Analyzing the data from 2003 to 2023, it is evident that Bio-Techne's (TECH) dividend coverage by earnings has experienced significant fluctuations. Initially, up until 2008, there were no dividends paid. However, post-2008, as Bio-Techne started distributing dividends, its Earnings Per Share (EPS) has mostly been able to cover these payments. Notably, between 2009 and 2019, the dividend coverage ratio was above 1, implying that the earnings were more than sufficient to cover dividends. However, the ratios significantly dropped in 2020 and beyond (0.852992136478742 in 2020 to around 0.17631825444928095 in 2023), suggesting that dividends are now barely covered by earnings, raising concerns about the sustainability of these payments. This downward trend in cover ratios can be worrisome for investors seeking reliable dividend income.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates a company's ability to pay its dividend payouts from its current cash flow, ensuring the sustainability of dividend payments.

Analyzing Bio-Techne's free cash flow and dividend payout ratio, it becomes evident that since the company began paying dividends in 2009, the coverage ratio has fluctuated. Although there was no payout before 2009, from 2010 onwards, the coverage ratio has generally remained above 0.30, peaking at around 0.43 in 2013. However, the trend shows a decline in recent years, with the 2023 ratio dropping to approx 0.23. High coverage points to a stronger position to sustain dividends. The declining ratio warrants monitoring as continuous reduction might jeopardize future dividend stability. Nonetheless, ratios above 0.30 still provide a degree of security.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Bio-Techne (TECH) and why it is important to consider

A stable dividend payment is a critical factor for income-seeking investors, as it offers predictability and a reliable revenue stream. The key to assessing stability lies in whether the dividend per share has dropped by more than 20% at any point over the past two decades. Significant drops in dividends can indicate financial instability or business challenges, which can jeopardize future income.

Dividends Paid for Over 25 Years?

Explain the criterion for Bio-Techne (TECH) and why it is important to consider

Dividends Paid for Over 25 Years? Criterion 6 evaluates the consistency and longevity of a company's dividend payments over a quarter-century. This is crucial in assessing the company’s financial stability and commitment to returning value to its shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluating a company's stock repurchase trend over two decades reveals its commitment to returning value to shareholders. Consistent buybacks can also indicate strong financial health.

Bio-Techne exhibited fluctuating stock repurchase patterns over the past two decades. The years of significant buybacks occurred primarily between 2004 and 2013, and then again in 2019. Despite instances of buybacks, the overall average share reduction was approximately -0.3271% per year. This is primarily a positive trend, reflecting Bio-Techne's commitment to leveraging buybacks during strong financial periods, though it did not opt for consistent annual repurchases.