Last update on 2024-06-27

Assurant (AIZ) - Dividend Analysis (Final Score: 6/8)

Assurant (AIZ) dividend policy scored 6/8 based on performance and stability analysis, utilizing an 8-criteria system assessing growth, payout ratio, and coverage by earnings and cash flow.

Short Analysis - Dividend Score: 6

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

The analysis explored Assurant's (AIZ) dividend policy by evaluating it using eight criteria. Assurant scored a 6 out of 8. They have a slightly below industry average current dividend yield at 1.6737%, inconsistent long-term dividend growth rates, and maintained an average payout ratio well below the 65% threshold at 21.54%. Their dividends were well covered by earnings except for 2023 with an EPS of zero, and cash flow coverage showed significant fluctuation, indicating some pressures on dividend sustainability. The company has maintained stable and increasing dividends since 2004, though it hasn't hit the 25-year consistency mark. They also demonstrated reliable buybacks over the last 20 years but lacked 2023 data.

Insights for Value Investors Seeking Stable Income

Assurant has a strong history with some positive indicators like low payout ratio, stable dividends, and consistent stock buybacks. However, factors like inconsistent dividend growth rates, 2023 profitability issues, fluctuating cash flow coverage, and not hitting the 25-year mark for dividends slightly weaken its reliability as a consistent dividend payer. If you're looking for steady returns and can tolerate some inconsistency and risk, Assurant might be worth investigation but would benefit from close monitoring and complementary investments to mitigate potential downsides.

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 provides investors with a sense of how much cash flow they are getting per dollar invested in an equity position. A higher dividend yield often signifies an undervalued stock, while a lower yield may indicate it is getting overpriced dividend-wise.

Assurant's current dividend yield of 1.6737% is slightly below the industry average of 1.8%. Historically, Assurant's dividend yield has shown significant fluctuation, reaching as high as 2.5492% back in 2018. These fluctuations often correlate with stock price movements and changes in dividend payouts. For instance, the yield was high during the global financial crisis in 2008 when the stock price dropped to $30. These fluctuations indeed suggest volatile investor returns dependent on market conditions. While the current yield is slightly off the industry average, Assurant has been consistent in its dividend payouts and has provided moderately increasing dividends over the years, growing from $0 in 2003 to $2.82 in 2023. This consistent growth in dividend payouts indicates a relatively stable dividend policy, which adds some level of investor confidence even though the yield is not consuming the industry benchmark.

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

The Dividend Growth Rate measures the annualized percentage growth over specific periods, here spanning 20 years. It helps investors analyze if future dividend payments are likely to increase.Sustained growth above 5% could indicate financial health and a commitment towards returning capital to shareholders; however, inconsistence in growth poses a risk of unreliability.

Assurant's dividend growth rate over the last 20 years shows highly irregular trends, with significant drops in some years contrasting with sharp increases in others. The values suggest volatility, with early years showing steep reductions post-2005. In recent years, steady declines persist, with values dropping below 5% mark from 2018 and reaching as low as 2.9197% in 2023. An average Dividend Ratio of ~13.88% does not mask this inconsistency: reliable, consistent growth is vital for investor confidence and sustainable yield assurance. Thus, this divident growth trend is concerning,and not reflective of steady, secure increase.

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

The Average Payout Ratio is the average amount of earnings paid out as dividends to shareholders. A ratio lower than 65% generally signifies that a company retains a clear majority of its earnings, which can indicate financial health and potential for growth.

The Average Payout Ratio for Assurant (AIZ) over the last 20 years is 21.54%, which is well below the 65% threshold. In individual years, it only exceeded this threshold in 2015 and occasionally approached it in other isolated instances. This trend indicates that Assurant retains a significant portion of its earnings, suggesting robust financial health and the potential for future growth. Moreover, a low payout ratio provides the company with more cushion to maintain its dividend payouts even in lean years.

Dividends Well Covered by Earnings?

Earnings coverage of dividends indicates a company's ability to pay dividends without borrowing funds. It is essential for a stable and sustainable dividend.

From 2003 to 2023, Assurant's earnings have consistently exceeded the dividends paid, except for 2023 where earnings per share (EPS) is zero. For instance, in 2021, the EPS was 23.0264, while the dividend per share was 2.66, resulting in earnings coverage of 8.65 times the dividend. These figures point to a solid ability to cover dividends with earnings over the years, indicating a good sustainability of dividends. However, the zero EPS in 2023 is concerning, as it suggests potential underlying issues affecting profitability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refer to the ability of a company to pay dividends from its free cash flow. It indicates financial health and sustainability.

When analyzing Assurant's (AIZ) dividend coverage by cash flow over the past two decades, we observe varying trends in coverage ratios. Notably, during 2009, the ratio surged to 32.52%, followed by significant instability until 2016, when it peaked at 254.29%. By 2023, the coverage fell to 16.28% indicating potential pressure on dividend sustainability. Despite fluctuations, the generally low ratios signify concerns about consistent dividend payments relying heavily on volatile free cash flow. A sustainable trend should ideally show coverage ratios comfortably above 50% which AIZ does not consistently achieve, making the current trend worrying for long-term dividend reliability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Over the past 20 years, Assurant (AIZ) has displayed a consistently rising dividend per share, starting from $0.21 in 2004 and reaching $2.82 in 2023. This steady increase is indicative of strong financial health and a commitment to rewarding shareholders. Notably, there has been no year in which the dividend per share decreased by 20% or more, illustrating remarkable stability. For income-seeking investors, this trend is highly positive as it suggests reliability and predictability in income streams. Therefore, Assurant meets the criterion of stable dividends over the past two decades, which is a highly favorable sign.

Dividends Paid for Over 25 Years?

This criterion assesses whether Assurant has consistently paid out dividends for the past 25 years. Consistent dividend payments indicate financial stability and a commitment to returning value to shareholders.

According to the provided data, Assurant (AIZ) has been paying dividends only since 2004, which means that it has not met the criterion of paying dividends for over 25 years. The dividend payments started at $0.21 per share in 2004 and have gradually increased to $2.82 per share in 2023. While this trend shows a positive growth in dividend payouts, Assurant still does not satisfy the requirement of 25 years of consistent dividend payments. This is a minor concern for investors seeking long-term dividend reliability. However, the steady increase in dividends over nearly two decades points to the company's financial health and commitment to shareholder returns.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate a company's confidence in its prospects and can enhance shareholder value by reducing the number of shares outstanding.

Assurant (AIZ) has demonstrated a consistent stock repurchase pattern over the past 20 years. The number of shares outstanding decreased from 109.2 million in 2003 to 54.3 million in 2022, reflecting a significant reduction over the period. The average repurchase rate over the past 20 years is -8.0857%. This consistent reduction in shares is a positive indicator, showing that Assurant has been committed to returning value to shareholders through share buybacks. It suggests that the company had sufficient free cash flow and confidence in its financial health. However, the complete absence of data for 2023 raises a question about the continuation of this trend. Overall, the trend has been good, reflecting favorably on Assurant's commitment to enhancing shareholder value.