Last update on 2024-06-28

Bureau Veritas (4BV.F) - Dividend Analysis (Final Score: 4/8)

Analyze Bureau Veritas (4BV.F) dividends using our 8-criteria scoring system to evaluate performance and stability. Final dividend score: 4/8. Learn more.

Short Analysis - Dividend Score: 4

We're running Bureau Veritas (4BV.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Bureau Veritas (4BV.F) has been evaluated based on an 8-criteria scoring system focusing on its dividend policy. The company received a dividend score of 4. The analysis included: **1. Dividend Yield:** Bureau Veritas' yield of 3.3742% is higher than the industry average of 1.83%, although it shows considerable historical fluctuations. **2. Dividend Growth Rate:** While the average annual growth rate of 9.28% over the last 20 years is higher than 5%, there are substantial year-on-year inconsistencies. **3. Payout Ratio:** The average payout ratio of 67.84% exceeds the optimal 65%, skewed by exceptionally high ratios in 2014 and 2020. **4. Dividends Coverage by Earnings:** The company's ability to cover dividends by earnings has been inconsistent, with recent improvements. **5. Dividends Coverage by Cash Flow:** The company has faced challenges in covering dividends with free cash flow, displaying a persistent below ideal coverage ratio below 1. **6. Stable Dividends:** Bureau Veritas has provided 20 years of stable dividend payments, indicating reliability. **7. Long-term Dividend Payments:** The company’s dividends span over 25 years, showcasing long-term shareholder commitment. **8. Stock Repurchasing:** The company's stock repurchase strategy has been inconsistent, with significant repurchases in only a few years.

Insights for Value Investors Seeking Stable Income

Given the analysis, investing in Bureau Veritas (4BV.F) presents a mixed picture. The company has a higher-than-average dividend yield and a strong historical average growth rate, which may attract income-seeking investors. However, issues such as the inconsistency in dividend coverage by both earnings and cash flows, coupled with a payout ratio slightly above the ideal benchmark, pose potential risks. Additionally, the irregular stock repurchase trend questions the company's commitment to enhancing shareholder value consistently. Potential investors should consider both the strengths and the fluctuating financial indicators before making a decision. Bureau Veritas may be a viable option for those comfortable with some degree of risk and looking for long-term dividends, but a cautious approach is advised.

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?

Dividend yield is an important metric that indicates how much a company pays out in dividends each year relative to its stock price.

Bureau Veritas' dividend yield of 3.3742% is significantly higher than the industry average of 1.83%. Historically, Bureau Veritas has maintained a fluctuating dividend yield, peaking at 8.6464% in 2013 and hitting the lowest of 1.2299% in 2020. This current yield suggests a strong income incentive for investors compared to industry peers. Evaluating the trends, the company's stock price has seen considerable growth in value from €7.0275 in 2008 to €22.82 in 2023. Despite volatility in dividend yields, the rising stock price indicates overall positive growth. A consistently higher dividend yield can be interpreted as a strong income potential for investors, signalling the company's commitment to returning capital to shareholders. However, it's also essential to consider the payout ratio to ensure sustainability.

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

The Dividend Growth Rate represents the annualized percentage rate of growth that a particular stock's dividend achieves over a period of time. It is crucial as it signifies the company’s ability to increase its dividend payouts consistently, indicating potentially rising profitability and shareholder value.

Analyzing Bureau Veritas (4BV.F) over the last 20 years, their dividend growth rate shows significant annual fluctuations. Several instances indicate peaks exceeding 40%, such as in 2011 (36.9048%), 2013 (44.0945%), 2020 (100%), and the most recent being 2022 (47.2222%). However, it's also marked by drastic negative drops like in 2014 (-73.7705%) and 2021 (-67.8571%), and even some years with zero growth (2009, 2015, 2019). While the average annual growth rate stands at 9.28%, which exceeds the 5% threshold indicating robust overall growth, the inconsistency year-on-year is a concern. Thus, despite a positive long-term trend, the volatility in growth rates should be carefully monitored by investors.

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

average payout ratio

The average payout ratio over the last 20 years is 67.84%. While this figure slightly exceeds our benchmark of 65%, it's critical to examine the reasons behind it. A higher payout ratio can imply a more generous dividend policy but also point to potential stresses in sustaining dividend payments. The notably high payout ratios in 2014 (236.65%) and 2020 (401.00%) significantly skew the average. Excluding these years, Bureau Veritas generally stays within a favourable range, with a strong recovery observed in recent years (51.35% in 2022 and 38.57% in 2021). This overall trend reflects positively on the company's ability to adapt and manage dividend payouts more sustainably post-crisis years.

Dividends Well Covered by Earnings?

Dividends covered by earnings indicate the company's ability to sustain or grow dividend payouts from its existing earnings. A high coverage ratio suggests financial health and prudent management.

The trend of Bureau Veritas (4BV.F) covering its dividends with earnings has been inconsistent over the years. For instance, in 2009 and 2010, the coverage ratios were relatively low at ~0.30-0.31, suggesting that dividends were high relative to earnings, which can be risky. Conversely, in 2020, the ratio spiked to 4.01, indicating a significant buffer between earnings and dividends, potentially due to a reduction in dividends amidst the COVID-19 pandemic or an unexpected earnings surge. On average, more recent figures like the 0.692 in 2023 look healthier compared to earlier years, signaling improvements but pointing towards occasional volatility. The weighted analysis over this period suggests taking a conservative view, considering both positive trends and past inconsistencies.

Dividends Well Covered by Cash Flow?

The criterion evaluates if a company's dividend payouts are sustainably covered by its free cash flow.

Examining Bureau Veritas's (4BV.F) historical data, we observe a varying degree of dividend coverage by free cash flow. An ideal ratio is above 1, indicating that the company generates enough free cash flow to cover its dividend payouts fully. Here, the coverage ratio remained below 1 throughout the period, fluctuating from as low as 0.0447 in 2020 to highs like 0.673 in 2017. Despite a substantial free cash flow of €662.1 million in 2023, the payout ratio at 0.598 indicates dividends are not fully covered by cash flow. While substantial improvement from prior lower ratios is evident, Bureau Veritas must enhance cash flow management and/or payout moderation to ensure dividends are sustainably covered. This trend, although improving, underscores persistent challenges with liquidity and potentially higher reliance on external financing or reserves to maintain dividends, paramount for investor security and long-term stability.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Bureau Veritas (4BV.F) and why it is important to consider

Stable dividends over the past 20 years ensures investors can depend on regular income. Consistent dividends reflect management's commitment to returning profits to shareholders and signify a company's financial health and profitability.

Dividends Paid for Over 25 Years?

Explain the criterion for Bureau Veritas (4BV.F) and why it is important to consider

This criterion examines if Bureau Veritas has consistently paid dividends to its shareholders for over 25 years as a measure of its reliability, financial stability, and shareholder value creation.

Reliable Stock Repurchases Over the Past 20 Years?

analyzing stock repurchase trends over a long period, such as 20 years, provides insight into the company's capital allocation strategy, shareholder value enhancement, and market confidence. It's essential to see consistent repurchases as a positive indicator.

Bureau Veritas (4BV.F) has exhibited mixed stock repurchase activities over the last 20 years. The significant inconsistency, with notable repurchases in limited years—specifically 2006, 2014, 2015, 2016, 2017, and 2018—suggests an irregular approach. The average of 56.8805 implies periods of repurchase followed by long gaps, making the trend somewhat erratic. This inconsistency in repurchasing strategy, coupled with years of no or high increases in share count (such as 2013 to 2015), could indicate a lack of dedicated buyback policy. Reliable repurchase programs often reflect strong confidence in the firm's future, and the scattered approach seen here is less ideal.