Benchmark Electronics (NYSE:BHE) Is Due To Pay A Dividend Of $0.165
The board of Benchmark Electronics, Inc. (NYSE:BHE) has announced that it will pay a dividend on the 13th of July, with investors receiving $0.165 per share. Based on this payment, the dividend yield on the company's stock will be 2.6%, which is an attractive boost to shareholder returns.
See our latest analysis for Benchmark Electronics
Benchmark Electronics' Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Benchmark Electronics was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to rise by 11.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.
Benchmark Electronics Is Still Building Its Track Record
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was $0.60 in 2018, and the most recent fiscal year payment was $0.66. This implies that the company grew its distributions at a yearly rate of about 1.9% over that duration. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Benchmark Electronics has grown earnings per share at 46% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Benchmark Electronics has 2 warning signs (and 1 which is significant) we think you should know about. Is Benchmark Electronics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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