U.S. markets open in 2 hours 30 minutes
  • S&P Futures

    4,065.50
    -10.00 (-0.25%)
     
  • Dow Futures

    34,009.00
    -14.00 (-0.04%)
     
  • Nasdaq Futures

    12,047.50
    -59.25 (-0.49%)
     
  • Russell 2000 Futures

    1,907.10
    -3.40 (-0.18%)
     
  • Crude Oil

    82.30
    +1.29 (+1.59%)
     
  • Gold

    1,930.10
    +0.10 (+0.01%)
     
  • Silver

    23.82
    -0.20 (-0.83%)
     
  • EUR/USD

    1.0881
    -0.0011 (-0.10%)
     
  • 10-Yr Bond

    3.4930
    0.0000 (0.00%)
     
  • Vix

    18.83
    -0.25 (-1.31%)
     
  • GBP/USD

    1.2370
    -0.0037 (-0.30%)
     
  • USD/JPY

    129.8910
    -0.2620 (-0.20%)
     
  • BTC-USD

    22,957.62
    -31.59 (-0.14%)
     
  • CMC Crypto 200

    520.11
    -7.07 (-1.34%)
     
  • FTSE 100

    7,776.06
    +14.95 (+0.19%)
     
  • Nikkei 225

    27,382.56
    +19.81 (+0.07%)
     

Baxter International (NYSE:BAX) Has Announced A Dividend Of $0.29

Baxter International Inc. (NYSE:BAX) has announced that it will pay a dividend of $0.29 per share on the 3rd of January. This means the dividend yield will be fairly typical at 2.1%.

Check out our latest analysis for Baxter International

Baxter International's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Baxter International is not generating a profit, and despite this is paying out most of its free cash flow as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 17%, which we would be comfortable to see continuing.

historic-dividend
historic-dividend

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was $1.34, compared to the most recent full-year payment of $1.16. Doing the maths, this is a decline of about 1.4% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Baxter International's EPS has fallen by approximately 12% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Baxter International's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Baxter International (1 is potentially serious!) that you should be aware of before investing. Is Baxter International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here