Last update on 2024-06-27

AmerisourceBergen (ABC) - Dividend Analysis (Final Score: 5/8)

Dive into the AmerisourceBergen (ABC) dividend analysis with a final score of 5/8. Learn about the performance and stability of ABC's dividends over 20 years.

Short Analysis - Dividend Score: 5

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

The dividend analysis of AmerisourceBergen (ABC) assesses eight criteria: Dividend Yield, Dividend Growth Rate, Payout Ratio, Earnings Coverage, Cash Flow Coverage, Dividend Stability, Longevity of Payments, and Stock Repurchases. ABC achieved a dividend score of 5 out of 8, indicating a moderate performance. Key findings show that ABC's current dividend yield (0.5232%) is below the industry average (0.98%), making it less attractive for yield-focused investors. While the average dividend growth rate is high, its volatility suggests caution. The average payout ratio (15.01%) is conservatively low, which is positive, but extreme variations in certain years need further investigation. Dividend coverage by earnings and cash flow generally looks strong but shows concerning dips in specific years. Stable dividends have been observed but a notable drop in 2023 raises alarms. Finally, the longevity of dividend payments is significant yet recent declines suggest potential stress. Stock repurchases have been reliable inflation-adjusted showing the company's commitment to returning value.

Insights for Value Investors Seeking Stable Income

Investors considering AmerisourceBergen (ABC) should note mixed results in its dividend analysis. Although there are strong points like a conservative payout ratio and historically well-covered dividends, concerning factors such as recent dividend yield declines, dividend growth rate volatility, and 2023's sudden dividend drop merit caution. With a score of 5/8, ABC could be of interest if you're seeking stability but consider the risks highlighted. Further assessment of recent financial health and strategic direction is advisable to ensure a balanced decision.

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 compares the annual dividend income to the stock's price, expressed as a percentage.

AmerisourceBergen's (ABC) current dividend yield of 0.5232% is below the industry average of 0.98%, which weakens its attractiveness to yield-focused investors. Over the past 20 years, ABC's dividend yield hit a peak of 3.6149% in 2007 and has generally been above the industry average. Recently, a declining yield trend reflects valuation growth rather than dividend cuts, as 2023's $0.97 DPS suggests payout stability amidst rising stock prices, currently closing at $185.41. This trend could concern income investors who prioritize high yields.

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

The Dividend Growth Rate measures how the dividend payments for a company have increased historically. A strong growth rate is indicative of financial health and shareholder value.

AmerisourceBergen's (ABC) Dividend Growth Rate over the past 20 years displays significant volatility, with some extreme highs and lows—most notably, a striking peak of 1197.6% and a trough of -79.963%. The negative figures and high fluctuation indicate an inconsistency. Averaging at a 70.26% growth may seem impressive but does not illustrate a stable trend. Therefore, while the average exceeds 5%, the inconsistency suggests caution.

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

A payout ratio lower than 65% shows that a company retains enough earnings to reinvest in growth and is typically financially stable.

The payout ratio of AmerisourceBergen (ABC) over the last 20 years has varied significantly, even showing negative values in some years. Most importantly, the average payout ratio stands at 15.01%, which is significantly below the 65% threshold. This indicates that ABC has maintained a conservative dividend policy, preserving ample earnings for reinvestment and company growth. However, extreme fluctuations in some years, such as 2015 (-195.35%) and 2016 (89.68%), merit further investigation to understand the factors behind these anomalies. Generally, the consistently low average payout ratio reflects positively on ABC's financial stability and long-term strategic planning.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

Analyzing the Earnings per Share (EPS) of AmerisourceBergen (ABC) from 2003 to 2023, it's clear that there are fluctuations in the EPS. Key years of decrement were 2005, 2008, 2013, 2015, 2020 and 2023, where values dipped significantly. Looking at 2020, the EPS went into the negative, recording -$16.6455, while 2023 is at $0.0. Subsequently, the Dividend per Share (DPS) observed a steadier growth, although notable dips occurred, especially in 2008 and for the upcoming year of 2023. The dividend coverage ratio, representing how well earnings cover dividends, also exhibits variability. Through this period, a troubling aspect arises in years where the EPS was negative or significantly reduced. For instance, in 2020 and 2023, the ratio became negative or zero, indicating poor coverage. Investors should view this trend critically as inconsistent earnings pose risks to sustainable dividends. Overall, although there were periods of strong coverage, the negatives and significant reductions highlight potential financial instability.

Dividends Well Covered by Cash Flow?

Dividends well-covered by cash flow means the company generates sufficient cash to meet its dividend payments.

Upon analyzing the free cash flow (FCF) and dividend payout of AmerisourceBergen (ABC) from 2003 to 2023, it is evident that the dividend is generally well-covered by cash flow. The ratio of dividend payout to free cash flow annually varies, but averages comfortably above essential thresholds in many years—indicative of sufficient cash flow to cover dividend commitments. Particularly noteworthy is the ratio in 2023, which is 0, signaling potential concerns. Nevertheless, historical ratios suggest generally strong coverage.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for AmerisourceBergen (ABC) and why it is important to consider

The dividend per share for AmerisourceBergen over the past two decades is as follows: 0.025 in 2003, 0.025 in 2004, 0.0313 in 2005, 0.0625 in 2006, 0.0811 in 2007, 0.1625 in 2008, 0.24 in 2009, 0.34 in 2010, 0.46 in 2011, 0.60 in 2012, 0.865 in 2013, 0.995 in 2014, 1.21 in 2015, 1.385 in 2016, 1.475 in 2017, 1.54 in 2018, 1.6 in 2019, 1.7 in 2020, 1.78 in 2021, 1.865 in 2022, and 0.97 in 2023. Notably, the dividend did not drop by more than 20% in any year till 2023, except for the steep decline witnessed recently. For income-seeking investors, the ability to rely on stable dividend payments is crucial. A consistent and gradually increasing dividend yields regular income and demonstrates the company's financial health and commitment to returning capital to shareholders. However, the sudden drop in 2023 marks a troubling sign and calls for further investigation. This aberration could significantly impact the attractiveness of ABC's dividends for prospective and current investors.

Dividends Paid for Over 25 Years?

Analyzing whether a company has paid dividends for over 25 years can provide insights into its stability and commitment to returning value to shareholders. Long-term dividend payments suggest resilience and strong cash flow.

The data on dividends per share for AmerisourceBergen (ABC) demonstrates a notable commitment to returning value to shareholders, albeit with some inconsistencies. From 1998 to 2003, dividends were minimal, gradually increasing thereafter. The dividend per share showed significant growth from 2006 onward, peaking at $1.865 in 2022. However, the considerable drop to $0.97 in 2023 raises concerns. While the trend initially reflects positively on ABC's ability to generate and share profits, the recent decline could indicate potential financial stress or a strategic shift in capital allocation. Overall, despite this recent setback, the company's prior 25-year track record is predominantly stable, suggesting a generally positive view, but with caution warranted due to the latest year's drop.

Reliable Stock Repurchases Over the Past 20 Years?

reliable stock repurchases over the past 20 years and why it is important to consider

When analyzing stock repurchase trends for AmerisourceBergen (ABC) over the past 20 years, we observe that the average rate of repurchased shares is -3.9653%. Reliable repurchases indicate a company's commitment to returning value to shareholders by reducing the number of outstanding shares. This often results in an increase in the earnings per share (EPS), making the stock more attractive to investors.