Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Benchmark Electronics Inc (NYSE:BHE) has started paying a dividend to shareholders. It currently trades on a yield of 2.5%. Should it have a place in your portfolio? Let’s take a look at Benchmark Electronics in more detail.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- 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?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Benchmark Electronics pass our checks?
The current payout ratio for BHE is negative, meaning that the company is not yet profitable and is paying dividend by dipping into its retained earnings.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. 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. Unfortunately, it is really too early to view Benchmark Electronics as a dividend investment. It has only been paying out dividend for the past one year. Generally, the rule of thumb for determining whether a stock is a reliable dividend payer is that it should be consistently paying dividends for the past 10 years or more. Clearly there’s a long road ahead before we can ascertain whether BHE one as a stable dividend player.
Compared to its peers, Benchmark Electronics has a yield of 2.5%, which is high for Electronic stocks but still below the market’s top dividend payers.
After digging a little deeper into Benchmark Electronics’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, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for BHE’s future growth? Take a look at our free research report of analyst consensus for BHE’s outlook.
- Historical Performance: What has BHE’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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 firstname.lastname@example.org.