Baker Technology (SGX:BTP) Has Announced That It Will Be Increasing Its Dividend To SGD0.015

Baker Technology Limited's (SGX:BTP) periodic dividend will be increasing on the 21st of May to SGD0.015, with investors receiving 50% more than last year's SGD0.01. Based on this payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

See our latest analysis for Baker Technology

Baker Technology's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Baker Technology's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 13.8% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 32%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was SGD0.25, compared to the most recent full-year payment of SGD0.015. This works out to a decline of approximately 94% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Baker Technology's EPS has declined at around 14% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Baker Technology's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Baker Technology's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Baker Technology is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Baker Technology that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.