Last update on 2024-06-27

Koninklijke Ahold Delhaize (AD.AS) - Dividend Analysis (Final Score: 5/8)

Explore the comprehensive dividend analysis of Koninklijke Ahold Delhaize (AD.AS) using an 8-criteria scoring system with a final score of 5/8.

Short Analysis - Dividend Score: 5

We're running Koninklijke Ahold Delhaize (AD.AS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

### Dividend Analysis Summary for Koninklijke Ahold Delhaize (AD.AS) 1. **Dividend Yield**: Koninklijke Ahold Delhaize's dividend yield of 4.1522% is significantly higher than the industry average of 2.56%. Higher yields attract investors looking for solid returns. 2. **Average Annual Growth Rate**: The dividend growth rate has been inconsistent with several significant outliers (e.g., -71.4527 in 2015 and 282.1136 in 2014), making it unreliable despite the total average being above 5%. 3. **Average Annual Payout Ratio**: The average payout ratio over the last 20 years is 48.70%, well below the 65% threshold, which is a good indicator of sustainable dividend payments. 4. **Dividends Covered by Earnings**: Earnings per share show an overall upward trend, from a negative -0.0016 in 2003 to 1.948 in 2023, indicating a solid ability to support dividend payments. 5. **Dividends Covered by Cash Flow**: The coverage ratio has been inconsistent, but recent years' figures hover around 16-20%. Although low, the significant growth in free cash flow from €552M in 2003 to €6.4B in 2023 adds a layer of confidence. 6. **Stable Dividends**: The dividend payouts have been generally stable since 2009, although this doesn't take into account whether they were paid before this timeframe. 7. **Dividends Paid Over 25 Years**: The company started paying dividends in 2009, so it doesn't fulfill the 25-year continuity criterion. 8. **Stock Repurchases**: There has been a consistent trend in repurchasing shares, averaging 3.27% annually, which benefits shareholder value.

Insights for Value Investors Seeking Stable Income

Given the analysis, Koninklijke Ahold Delhaize (AD.AS) presents a mixed bag for dividend investors. The high dividend yield and consistent earnings growth are strong positives, but the company's inconsistent dividend growth rate and relatively low cash flow coverage ratios require caution. The company’s history of repurchasing shares also adds to its attractiveness. **Recommendation:** Consider investing if you are looking for a high dividend yield and a company with growing earnings. However, be aware of inconsistencies in dividend growth and coverage ratios. It's advisable to further investigate the factors behind the fluctuation in past dividends to get a comprehensive understanding.

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 how Dividend Yield impacts investor decisions and financial attractiveness of Koninklijke Ahold Delhaize.

The Dividend Yield of 4.1522% for Koninklijke Ahold Delhaize stands notably higher than the industry average of 2.56%. This higher yield suggests that investors are likely to find this stock more attractive for the cash returns. Reviewing the history of the past 20 years, the company's dividend yield had a significant spike in 2014 reaching (10.7223%), and 2016 showing (9.6012%), which is compelling but invites a closer understanding of sustainability. A closer look reveals that the company has consistently managed to stay above the industry average, although some fluctuations are apparent. In recent years, from 2020 to 2023, the yields hover in a competitive range from 2.75% to 4.15%. This trend is favorable as it demonstrates the company's capability to return significant value to shareholders. High dividend yields can be an indicator of an undervalued stock price or strong financial health capable of supporting generous payouts.

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

Dividend growth rate (DGR) indicates the percentage increase in company’s dividend payments over a certain period of time. A consistent DGR that is higher than 5% can signal financial health, sustained earnings growth, and shareholder commitment, making the stock attractive to income-focused investors.

Based on the Dividend Ratio data from 2003 to 2023 provided for Koninklijke Ahold Delhaize (AD.AS), the figures indicate significant fluctuations in dividends per share. The erratic nature of the ratios, including substantial negative values in some years (e.g., -71.4527 in 2015, -70.3593 in 2017, and -13.5417 in 2021), show inconsistencies in dividend growth. The calculated average dividend ratio of 29.654% is relatively high, mainly buoyed by extraordinary payouts in certain years (e.g., 282.1136 in 2014). However, these inconsistencies make it challenging to assert a steady dividend growth trend over the 20-year period. Hence, the trend cannot be deemed good due to the lack of consistency despite the average being above 5%.

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

The payout ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. A ratio lower than 65% indicates a company is retaining enough earnings to reinvest in growth.

Koninklijke Ahold Delhaize’s average payout ratio over the last 20 years stands at approximately 48.70%, which is well below the 65% threshold. This is generally a positive indicator for the company's dividend sustainability and potential for long-term growth. Specifically, years such as 2014 and 2016, with ratios exceeding 200%, should be noted as anomalies. In these periods, extraordinary events weakened the otherwise strong performance, but overall the company has maintained conservative and sustainable payout practices.

Dividends Well Covered by Earnings?

Earnings per Share (EPS) indicates the company's profitability and its capacity to pay dividends. A higher EPS shows more profit available per share.

The Earnings per Share (EPS) for Koninklijke Ahold Delhaize has an overall upward trend transitioning from a negative -0.0016 in 2003 to reaching highs of 2.5588 in 2022 although dipping slightly to 1.948 in 2023. This trend is positive because it reflects increasing profitability, which supports the company's ability to maintain or increase dividend payments. However, it's worth noting some volatility, as shown with significant ups and downs over the years. The latest figure of 1.948 still indicates healthy earnings, particularly compared to earlier years. Hence, from the perspective of EPS growth, the trend is good.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow gauges a company's ability to generate enough cash flow to pay its dividends. This is important as it reflects the financial health and sustainability of the company's dividend payments over time.

Over the years, Koninklijke Ahold Delhaize has shown fluctuations in their capability to cover dividends with cash flow. The highest coverage ratio reached above 80% in 2006, while certain years such as 2005 and 2007 saw no dividend payments at all despite having positive cash flow. Focusing on recent years, the coverage ratio has hovered around 16-20%, which is not particularly high. Consistently low coverage ratios could indicate potential risk if cash flows were to suddenly drop, which could jeopardize dividend sustainability. Nonetheless, the overall increase in free cash flow over the period—from €552M in 2003 to over €6.4B in 2023—provides a solid underpinning for dividend payments despite their relatively low coverage ratios currently. This trend is a mixed bag; while the company has robust cash flows, the lower coverage percentages warrant a more cautious outlook on future dividend sustainability. Balancing the low coverage ratios with the impressive growth in free cash flow, the trend suggests both progress and elements of caution.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Koninklijke Ahold Delhaize (AD.AS) and why it is important to consider

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is a key indicator for income-seeking investors. This is because consistent dividend payments signal financial health and reliable cash flows, which are crucial for long-term investors looking for dependable income.

Dividends Paid for Over 25 Years?

Examining whether a company has consistently paid dividends for over 25 years is important as it indicates financial stability and a commitment to returning value to shareholders.

Based on the data provided, Koninklijke Ahold Delhaize (AD.AS) has not been paying dividends consistently over the past 25 years. The dividend payments began only in 2009, and there were no dividends for the years prior to that. Therefore, the company has just about 15 years of dividend payments. This indicates that while the company has maintained dividends for a decade and a half, it does not fulfill the criterion of paying dividends for over 25 years. This trend is not favorable for dividend investors looking for long-term, uninterrupted dividend income. However, it is worth noting that the company has been increasing its dividend payouts significantly, which may indicate strong financial health in recent years.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that a company is committed to returning value to shareholders. Consistently repurchasing shares over a long period can lead to enhanced shareholder value.

Koninklijke Ahold Delhaize (AD.AS) has shown a trend of repurchasing its own shares in several years within the past two decades. Notably, the years 2008, 2010, 2011, 2012, 2013, 2014, 2015, 2018, 2019, 2020, 2021, 2022, and 2023 have seen share repurchases. The average number of shares repurchased annually is approximately 3.27%. Such a practice enhances shareholder value by potentially increasing earnings per share (EPS) and implying that the management believes the stock is undervalued. This is a positive indicator of the company's commitment to returning value to its shareholders and maintaining a disciplined capital allocation strategy.