Last update on 2024-06-27

Agilent Technologies (A) - Dividend Analysis (Final Score: 5/8)

Analyze the performance and stability of Agilent Technologies' dividend policy using an 8-criteria scoring system, yielding a final score of 5/8.

Short Analysis - Dividend Score: 5

We're running Agilent Technologies (A) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Agilent Technologies' dividend analysis uses an 8-criteria system to rate its performance. It highlights that Agilent's current dividend yield is 0.6553%, which is higher than the industry average of 0.39% in 2023. However, Agilent has struggled with consistency over the past 20 years, particularly in maintaining a dividend growth rate above 5%, with the actual average at 2.91%. Conversely, its average payout ratio is well below 65% at around 16.16%, showing financial prudence. While its dividend coverage by earnings and cash flow shows improvement, with a coverage ratio increasing to 17.98% in 2023, it remains below the ideal of 1. Additionally, Agilent has not maintained a 20-year record of paying stable dividends, nor has it a 25-year record of continuous payments. The company's history with reliable stock repurchases demonstrates its strategy to boost shareholder value.

Insights for Value Investors Seeking Stable Income

Given Agilent Technologies' fluctuating dividend history and some less than ideal growth rates, it may not be the best option for those seeking a consistent and high dividend income. However, its stable payout ratio and prudent financial strategies, combined with improving cash flow coverage and share buybacks, point to underlying strengths. Potential investors should weigh these mixed factors and consider their own risk tolerance and income needs before making a decision. If stability and long-term dividend history are crucial, there might be better options, but for those looking at potential growth with financial discipline, Agilent could still be worth considering.

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?

Explain the criterion for Agilent Technologies (A) and why it is important to consider

Agilent Technologies (A) reports a dividend yield of 0.6553%, higher than the industry average of 0.39% in 2023. Over the last two decades, the company has witnessed fluctuations in dividend yield, with notable peaks and troughs. A close look reveals that the dividend yield was significantly high in 2006 at 5.9024%, followed by periods of non-payment and gradual increases and decreases. Despite a relatively lower yield than before, the company's 2023 figure still surpasses the industry average. This indicates a potentially more attractive income-generating investment relative to its peers. However, maintaining yields above industry norms is a positive sign, pointing toward stable or improving profitability. The rising trend, particularly from 2020 onward, signifies growth potential, yet given past inconsistencies, prospective investors should consider the sustainability of such dividends. Thus, the trend bodes well, affirming Agilent's effort to deliver shareholder value, even if it's not at earlier peak levels. A further assessment of the company's ability to continually meet or exceed these payout ratios would be prudent.

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

The Dividend Growth Rate criterion evaluates the percentage growth of dividends over a 20-year period; a rate above 5% is considered favorable for long-term investment.

Based on the given data, Agilent Technologies (A) does not appear to consistently surpass the 5% dividend growth rate criterion. The average dividend ratio over the last 20 years is approximately 2.91%, which is below the 5% threshold. The dividend per share ratio values demonstrate significant fluctuations, indicating an inconsistency in dividend payments—ranging from none at all in several years to erratic positive and negative percentages. This inconsistency and the average falling below the desired 5% LOrange may be viewed unfavorably by investors seeking stable and growing dividend income.

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

This criterion examines whether the payout ratio, which measures the proportion of earnings paid out as dividends, is sustainably low. A ratio below 65% indicates financial discipline and reserves for growth.

Over the past 20 years, Agilent Technologies has maintained an average payout ratio of approximately 16.16%. This is significantly lower than the 65% threshold, showcasing the company's prudent approach to managing its earnings and dividend payments. Notably, the payout ratio was 0% for several years, particularly from 2003 to 2009 (except 2006), reflecting a period of reinvestment and possibly restructuring. Despite fluctuating slightly in the subsequent years, it remained well below the 65% mark, reaching a peak of 62.84% in 2018. Keeping the payout ratio sustainably low without missing dividends reflects positively on Agilent Technologies' commitment to balancing shareholder returns with growth and stability. This trend is good, indicating a strong and conservative financial strategy conducive to long-term growth and investor confidence.

Dividends Well Covered by Earnings?

Explain why it is important for dividends to be well covered by the earnings of a company.

Let's review how well Agilent Technologies covers its dividend payments with its earnings over the years. For most of the timeline, there were years with no dividend pay-out, notably between 2008 and 2011. For others where dividends were paid, coverage ratios such as 0.196 in 2006, 0.167 in 2013, and fluctuating values up to 0.253 in 2022 are noted. Generally, investors prefer to see coverage ratios above 1, meaning earnings should be at least equal to the dividend paid.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means the company generates enough free cash flow to comfortably pay its dividends, suggesting financial stability.

Over the years, Agilent Technologies has shown an increasing capacity to cover its dividends through its free cash flow. In 2009 and prior years, the company did not pay dividends; hence, no cash flow coverage ratios are available. Starting from 2010, when dividends commenced, there has been a clear trend of low yet measurable coverage that progressively improves through to 2023. For instance, in 2012, the dividend payout was covered 10.06% by free cash flow, while in 2023, this figure rose to 17.98%. This upward trend indicates that the company is consistently able to cover its dividend payments with cash flow, thereby reinforcing their financial stability. However, a ratio below 1 still suggests some room for improvement to ensure dividends are fully covered by cash flows. Overall, this trend is a positive sign. 

Stable Dividends Since the Company Began Paying Dividends?

Why is it important to assess the stability of dividends over the past 20 years for Agilent Technologies (A)?

Dividend stability is crucial for income-focused investors who rely on consistent dividend payouts for their income streams. An erratically changing dividend could indicate potential financial instability or shifting capital allocation policies. Stability is essential for financial planning and confidence in a company’s future earnings.

Dividends Paid for Over 25 Years?

The criterion evaluates if Agilent Technologies has been consistent in paying dividends for over 25 years. This is important as it shows the company's commitment to returning value to its shareholders and indicates financial stability and maturity.

The data reveals that Agilent Technologies (A) does not meet the criterion of paying dividends consistently for over 25 years. Only since 2006 onwards has there been some evidence of dividend payments, with substantial gaps in certain years such as 2007 and 2008. A steady trend begins from 2015 without interruptions up to 2023. However, a prior 15-20 years of consistent dividend payments commonly preferred by investors is absent in Agilent’s case. This inconsistency can be seen as detrimental if long-term dividend history is a key criterion for potential investors.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Agilent Technologies (A) and why it is important to consider

One important factor for Agilent Technologies (A), and for evaluating almost any company, is their behavior with stock repurchases or share buybacks. This criterion is important because share buybacks can indicate a company’s confidence in its own future performance. When a company repurchases its own shares, it reduces the number of outstanding shares in the market, which generally increases the value of remaining shares and earnings per share (EPS). Share buybacks can be seen as a mechanism for returning value to shareholders.