Last update on 2024-06-27

Munich Re (0KFE.IL) - Dividend Analysis (Final Score: 6/8)

Analyze Munich Re (0KFE.IL) dividends with a robust 8-criteria scoring system. See the sustainability and growth of their dividend payments. Final score: 6/8.

Short Analysis - Dividend Score: 6

We're running Munich Re (0KFE.IL) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Munich Re (0KFE.IL) evaluates the company's dividend performance based on 8 key criteria. The company scores 6 out of 8. Munich Re's current dividend yield is significantly higher than the industry average, with a consistent increase in both dividends per share and stock price from 2003 to 2023, making it an attractive option for income-focused investors. While Munich Re has an impressive average annual dividend growth rate of 21.22%, the company's payout ratio of 69.91%, above the desired 65%, poses some concerns about earnings retention. Dividend coverage by earnings and cash flow shows variability, with notable improvements and risk elements. Stability is seen in dividends, improved reliability in recent years, though it has paid dividends consistently for 24 years, just shy of the 25-year milestone. The company also exhibits a strong history of stock repurchases, enhancing capital distribution and shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Munich Re (0KFE.IL) appears to be a promising investment for those seeking reliable income through dividends. Its consistent dividend yield, substantial growth rate, and commitment to returning value to shareholders through dividends and stock repurchases highlight its strength. However, potential investors should consider the higher-than-desired payout ratio and the fluctuating dividend coverage by earnings and cash flow, which suggest some risk. Overall, it is worth looking into Munich Re for a dividend-focused investment portfolio, with a focus on monitoring future payout policies and financial performance.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

What is Dividend Yield and why is it important?

Munich Re's current dividend yield stands at 6.1558%, which is significantly higher than the industry average of 3.11%. Looking at the historical data, Munich Re has consistently produced yields considerably above the industry average, with the only exception being the years 2020 and 2021. For instance, in 2022 and 2023, Munich Re provided yields of 3.6137% and 6.1558% respectively, compared to industry averages of 4.92% and 3.11%. This consistent performance indicates a stable and potentially lucrative dividend strategy. The high dividend yield might attract investors seeking income as part of their investment portfolio. However, it is essential to consider the stock price trends as well. Since 2003, the stock price of Munich Re has seen substantial growth from €68.36 to €376.88 in 2023, further cementing its attractive value proposition. Coupled with increasing dividends per share, rising from €1.25 in 2003 to €23.2 in 2023, Munich Re presents a promising investment, assuming they maintain their dividend payout strategy. Thus, this high and historically consistent dividend yield is favorable.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate criterion examines whether the dividends distributed by a company have grown at a rate higher than 5% annually over the past 20 years. This is a critical measure of financial health and the company's commitment to returning value to its shareholders through dividends. A consistent and high growth rate in dividends often signals robust revenue growth and profitability.

The provided data shows variations in the Dividend Growth Rates over 20 years for Munich Re (0KFE.IL). While some years (for example, between 2022 to 2023 and 2003 to 2004) exhibited remarkable positive growth rates (110.9091% and 100%, respectively), other periods saw negative growth (e.g., between 2006 to 2007 and 2011 to 2012, with rates of -27.4194% and -49.996% respectively). With an average dividend growth rate of 21.218233333333327%, Munich Re maintains an overall positive trend in its dividend growth rate. This average well exceeds the 5% criterion, indicating a good performance concerning consistent dividend increment. This bodes well for existing and potential shareholders as it demonstrates the company's robust capacity to generate and sustain returns. However, bumps along the way suggest some degree of volatility which should be noted.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average payout ratio lower than 65% indicates company's profitability and sustainability

Munich Re has an average payout ratio of 69.91% over the last 20 years, which is higher than the desired benchmark of 65%. Such a high payout ratio can indicate potential struggles in retaining earnings or may highlight investor demand for higher yields. For example, in 2011 and 2017 the payout ratios were 312.47% and 353.31% respectively, which is unsustainable. Notably in some years like 2007, 2018, and 2023, the company had payout ratios below the benchmark, showing potential for more controlled expenses or higher operational efficiency. Overall, this trend is suboptimal and points towards a need for better earnings retention.

Dividends Well Covered by Earnings?

This criterion evaluates if the company's dividends are sustainable based on its earnings. A higher coverage ratio indicates that dividends are well-supported by earnings, thus reducing the risk of future dividend cuts.

Munich Re's dividend coverage by earnings per share (EPS) has shown considerable fluctuation from 2003 to 2023. The coverage ratio uses EPS divided by dividends per share (DPS). Ideally, this ratio should be greater than 1. Examining the data: - **Early 2000s**: 2003 had a negative EPS, yielding a coverage ratio of -0.56. This means the company was not earning enough to cover its dividends, a concerning indicator. - **Late 2000s to Early 2010s**: A vast improvement, with ratios bouncing between 0.31 and 0.835, suggesting decent but not optimal coverage. - **2011 - 2013**: An exceptional year like 2011 showed a ratio of over 3, denoting excellent coverage. - **2015 and 2020**: Troubling markers with ratios of 3.53 in 2017 (due to poor earnings) and 2020 (1.13). - **2019 and 2021**: Conversely, 2019 showed a promising 0.47, indicating robust and fair payout equilibrium. Despite positive trends, particularly post-2012, the inconsistency overall poses a potential risk element.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow implies the company's free cash flow is sufficient to cover dividend payouts. This is crucial as it indicates financial health and sustainability.

For Munich Re (0KFE.IL), the free cash flow has been fluctuating over the years, with highs and lows affecting their cash dividend cover. The trend reveals that during certain years like 2013, the dividend payout exceeded half of the free cash flow (0.575), which is less ideal. Similarly, years like 2015 and 2023 show a high percentage of dividends covered by cash flow (0.299, 0.720), indicating possible strain on cash resources. However, most recent years like 2020 and 2021 show better metrics (0.140, 0.192) which are healthy indicators. Overall, a temporal trend towards a balanced or even conservative dividend policy could be noted, though vigilance is needed during low cash flow periods.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments is crucial as it indicates a company's consistency and reliability in returning value to shareholders, making it an attractive investment for income-seeking investors.

Over the past 20 years, Munich Re has demonstrated a stable dividend payment history. Analyzing the data, there is no single year in which the dividend per share dropped by more than 20%, which is a positive indication for potential investors. Specifically, the dividend per share has generally shown an upward trend or remained level, with a significant recent increase to 23.2 in 2023. This reliability underscores Munich Re's commitment to sharing profits with its shareholders consistently. Therefore, this trend can be considered very good for income-focused investors, reflecting the company's strong and stable financial health.

Dividends Paid for Over 25 Years?

The criterion of paying dividends for over 25 years examines the company's consistency and commitment to returning profits to shareholders. This is a key indicator of the company's financial health and stability.

The data shows that Munich Re (0KFE.IL) has consistently paid dividends from the year 2000 to 2023, spanning a period of 24 years. While this demonstrates a strong commitment to returning capital to shareholders, it falls short of the 25-year mark by only one year. The dividends per share (DPS) have generally increased over time, with a substantial rise in the most recent year to 23.2. This indicates a positive long-term trend, showcasing good financial health and profitability despite the slight miss on the 25-year criterion.

Reliable Stock Repurchases Over the Past 20 Years?

The dividend payout ratio measures what proportion of earnings are paid out as dividends to shareholders, highlighting the company's dividend policy.

Over the past 20 years, Munich Re (0KFE.IL) has demonstrated a commendable and consistent approach towards stock repurchases. The number of shares outstanding reduced markedly from 193.3 million in 2003 to 139.4 million in 2022, showcasing a strategic buyback policy. In pivotal years like 2005, 2006, 2007, etc., where the number of shares progressively dropped, Munich Re managed effective capital distribution, benefiting shareholders through both dividend payouts and stock repurchases. With an average repurchase rate of -6.5031 over the last two decades, this trend emphatically speaks to a solid and progressive capital management strategy. The steady decrease in share count is beneficial as it signals the company's confidence in its future performance, enhances earnings per share, and provides a tax-efficient method of returning cash to shareholders. Overall, this can be viewed as a healthy, shareholder-friendly initiative by Munich Re, affirming that the trend is quite positive.