Baxter International (NYSE:BAX) Will Pay A Dividend Of $0.17

Baxter International Inc. (NYSE:BAX) will pay a dividend of $0.17 on the 1st of April. The yield is still above the industry average at 2.0%.

Check out our latest analysis for Baxter International

Baxter International's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 487% of what it was earning and 89% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

The next 12 months could see EPS growing very rapidly. If the dividend continues along recent trends, we estimate the payout ratio could reach 84%, which is on the higher side, but certainly feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was $2.08, compared to the most recent full-year payment of $0.68. The dividend has fallen 67% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

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 Baxter International's EPS has declined at around 41% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Baxter International's Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Baxter International is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Baxter International you should be aware of, and 1 of them is a bit unpleasant. 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.