For investors looking for a dependable source of passive income, a methodical screening process is needed to distinguish solid dividend payers from possible value traps. One useful method involves selecting for companies that provide a good dividend and also show the basic financial capacity to maintain and possibly raise those payments. This method frequently centers on stocks with high dividend scores, which evaluate yield, growth, and sustainability, while also demanding a foundation of acceptable profitability and financial soundness. These other standards are vital; good profitability pays for the dividend, and a sound balance sheet offers stability in difficult economic periods, lowering the chance of a dividend reduction.
Baker Hughes Co (NASDAQ:BKR), a global energy technology company, recently appeared as a candidate from this type of dividend-focused screen. The company's basic profile suggests it may deserve additional examination by income-focused investors, especially those with an opinion on the changing energy sector.
Dividend Profile: A Focus on Reliability
Central to the screening method is the dividend itself, and BKR's numbers show a dedication to shareholder returns. The company's dividend score of 7 out of 10 shows a balanced view of its payout.
- Yield and Growth: BKR provides a dividend yield of 1.77%, which is fair and above the 1.17% average for its Energy Equipment & Services industry group. While the yearly dividend growth rate of 4.36% is moderate, it adds to a steady history. Importantly, the company has paid and, significantly, has not reduced its dividend for at least ten years, indicating management's focus on steady shareholder returns.
- Sustainability: This is where the screening rules for profitability and soundness directly back the dividend argument. BKR's payout ratio is at a very manageable 30.82% of earnings. This low ratio means the company keeps a large part of its income for reinvestment and debt payment, giving a clear cushion to continue the dividend even if earnings experience short-term stress. Also, the analysis points out that BKR's earnings are increasing more quickly than its dividend, which naturally makes the current payout more sustainable and allows for possible future raises.
Supporting Fundamentals: Profitability and Health
A high-yielding dividend is only as reliable as the company's capacity to continue it. The screen's extra filters for acceptable profitability and financial soundness are meant to find this capacity, and BKR meets this.
- Good Profitability: With a profitability score of 8, BKR runs effectively in its sector. Important numbers are notable:
- A Return on Equity (ROE) of 15.92% is better than 87% of industry peers.
- A good Profit Margin of 10.43% also ranks it in the top group of the industry.
- These good margins have gotten better in recent years, showing positive operational trends. This solid profitability creates the cash flow required to pay the dividend consistently.
- Acceptable Financial Health: BKR gets a health score of 5, showing a stable, though not outstanding, financial condition. The analysis shows a varied situation with clear positives and points to watch. On the good side, the company has a workable Debt/Equity ratio of 0.33 and a good Debt to Free Cash Flow ratio of 2.90 years, indicating acceptable solvency. However, liquidity ratios (Current and Quick Ratio) are seen to be lower than industry peers. For a dividend investor, the main point is that the company's overall solvency seems acceptable, which backs the sustainability of its capital return policy.
Valuation and Growth Context
While the main screen centers on dividend, profitability, and health, a complete view needs context on valuation and growth outlook. BKR currently trades at a Price/Earnings (P/E) ratio viewed as high in absolute terms but is actually less expensive than many peers in its industry. The company has shown good historical EPS growth and is projected to provide steady earnings growth in the mid-single digits going forward. This expected growth, along with its high profitability, helps support its current valuation for investors focused on the total return of dividend plus growth.
A Candidate for Further Research
For dividend investors using a screen that emphasizes sustainable yield backed by basic strength, Baker Hughes Co presents a notable case. It joins a reliable, well-supported dividend with better-than-average profitability in its sector. The full basic analysis, which lists every number behind these scores, can be seen in the full ChartMill Fundamental Report for BKR.
Investors searching for more ideas that match this methodical approach can examine the screen that found BKR. The set Best Dividend Stocks screener selects for stocks with high dividend scores while guaranteeing minimum levels for financial health and profitability, acting as a beginning point for creating a durable income portfolio.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis is based on historical data and current metrics, which are not guarantees of future performance. Investors should conduct their own research and consider their individual financial circumstances before making any investment decisions.
