Yahoo Finance Read This Before Buying Baxter International Inc. (NYSE:BAX) For Its Dividend
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Baxter International Inc. (NYSE:BAX) has paid a dividend to shareholders. It currently yields 1.2%. Let’s dig deeper into whether Baxter International should have a place in your portfolio.
Check out our latest analysis for Baxter International
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share amount increased over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Baxter International fit our criteria?
The current trailing twelve-month payout ratio for the stock is 31%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 26% which, assuming the share price stays the same, leads to a dividend yield of around 1.2%. However, EPS should increase to $2.98, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Baxter International fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
Compared to its peers, Baxter International produces a yield of 1.2%, which is on the low-side for Medical Equipment stocks.
Next Steps:
After digging a little deeper into Baxter International’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three relevant aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for BAX’s future growth? Take a look at our free research report of analyst consensus for BAX’s outlook.
Valuation: What is BAX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BAX is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
