Last update on 2024-06-28

Acciona (AJ3.F) - Dividend Analysis (Final Score: 6/8)

Acciona (AJ3.F) Dividend Analysis: Evaluating the performance and stability of Acciona's dividend policy based on an 8-criteria scoring system. Final Score: 6/8.

Short Analysis - Dividend Score: 6

We're running Acciona (AJ3.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Acciona (AJ3.F) evaluates the company based on 8 criteria to understand its dividend performance and stability. Acciona's current dividend yield of 3.405% is higher than the industry average, indicating a potentially good return for investors. Over the last 20 years, the average annual growth rate of dividends is above 5%, despite some fluctuations. The company's average payout ratio of 21.81% is comfortably below the 65% threshold, suggesting conservative financial management. However, dividends are not well covered by earnings, with coverage ratios below 1 from 2017 to 2023, indicating potential sustainability issues. Acciona's dividends are also not well-covered by cash flows, with negative coverage ratios in several years, signaling financial stress. Dividend history shows irregularity, with stability improving post-2016. The company has paid dividends for nearly 17 years but with significant volatility. Additionally, Acciona exhibits an inconsistent trend of stock repurchases, reflecting fluctuating confidence in its financial stability.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Acciona (AJ3.F) shows a mixed performance. While its high dividend yield and low payout ratio are positives, the poor coverage by earnings and cash flows, as well as the inconsistency in dividend payments and stock repurchases, raise concerns about the sustainability of its dividends. Investors seeking steady and reliable dividend income might find this stock less attractive. However, those willing to tolerate some risk and volatility for potentially higher returns might consider it. It is recommended to closely monitor the company's financial health and strategic decisions before investing.

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 a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. A higher yield can indicate a good return on investment for income-focused investors.

Acciona's (AJ3.F) current dividend yield of 3.405% is notably higher than the industry average of 2.27%, suggesting a potentially more attractive income opportunity for investors. Historically, Acciona's dividend yield has fluctuated, reaching as high as 10.8069% in 2016 and dropping to 1.6523% in 2020. The stability of the dividend yield improved post-2020, potentially due to better financial health or strategic management decisions. This high yield relative to its peers could be perceived as positive, yet investors should also investigate the sustainability of such payouts by analyzing the company's payout ratio, earnings growth, and cash flow.

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

Determining whether the Dividend Growth Rate for Acciona (AJ3.F) is higher than 5% over the last 20 years involves analyzing the recorded dividend per share values over this period. A sustainable and growing dividend is often a marker of financial stability and operational success.

Given the dividend per share values from 2007 to 2023, Acciona exhibits significant fluctuation, with some years showing negative values. The average dividend ratio is 13.92%. The inconsistency in the yearly ratios (e.g., -100% in 2014 and +275% in 2016) suggests volatility. However, reaching an average above 5% is positive. This trend might concern conservative investors seeking steady growth but could attract those willing to tolerate some volatility for potentially higher returns. Overall, the trend is mixed but leans towards positive given the average growth rate surpassing 5%.

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

Average Payout Ratio lower than 65% in the last 20 years assesses the proportion of earnings paid out as dividends. A lower payout ratio suggests conservative financial management and sustainability of dividend payments.

Acciona (AJ3.F) has an average payout ratio of 21.81% over the last 20 years, well below the 65% threshold. This is a positive trend, indicating a conservative approach to dividend payments and suggesting that the company retains a significant portion of its earnings for reinvestment or other uses. This prudence could indicate strong financial health and the sustainability of future dividends. The figures show a fluctuation, reaching as high as 74.72% in 2017, but overall, the company has maintained a reasonable payout ratio. Only three years exceeded the 65% threshold, reinforcing the company's generally conservative approach.

Dividends Well Covered by Earnings?

Dividends being well-covered by earnings indicate that a company is generating enough profit to sustain its dividend payments. This reduces the risk of dividend cuts and demonstrates financial health.

From 2017 to 2023, Acciona’s dividend coverage ratio has generally been below 1, implying that earnings are often insufficient to cover dividend payments fully. Specifically, the coverage ratios for these years range from 0.27 to 0.74. For instance, the lowest ratio is in 2020 (0.27), suggesting significant pressure on earnings to support dividends. Conversely, 2017 exhibited the highest coverage ratio of 0.74 within this period, albeit still below 1, indicating there is still insufficient earnings cover. This trend is concerning as it suggests dividends may not be sustainable long-term unless earnings increase or dividends are reduced.

Dividends Well Covered by Cash Flow?

This criterion assesses whether a company's dividends are sufficiently covered by its free cash flow. A higher coverage ratio indicates that the company is generating enough cash to support its dividend payments, which is crucial for sustainability and investor confidence.

Upon examining Acciona's (AJ3.F) dividend coverage by cash flow from 2017 to 2023, the trend appears problematic. Notably, negative free cash flows in multiple years (e.g., -€277.68M in 2017, -€600.01M in 2019, -€374M in 2021, etc.) contrast sharply with substantial dividend payouts that only increased over time (e.g., €164.57M in 2017, escalating to €325M in 2023). This has led to very low and even negative coverage ratios (-0.593 in 2017 to -0.271 in 2023), indicating insufficient free cash flow to cover dividends. Such persistently negative coverage signals potential stress on the company's finances and risks to the continuity of dividend payments. Hence, investors should approach cautiously as reliance on external funding might not be sustainable long-term.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years is crucial as it indicates the company's ability to generate consistent returns to its shareholders, reflecting financial stability and resilience.

Acciona (AJ3.F)'s dividend history shows a notable irregularity: while most years have stable payouts, the dividend per share dropped significantly to zero in 2014 and saw steep declines in 2010 and 2020. However, from 2016 to 2023, the company has maintained relatively stable dividends growing generally over this period. The high volatility in earlier years could concern an income-seeking investor. Such volatility might signal underlying financial challenges or shifts in company policy affecting income reliability.

Dividends Paid for Over 25 Years?

This criterion assesses whether Acciona has maintained a consistent dividend payout over the past 25 years, which reflects financial stability and a commitment to returning shareholder wealth.

Acciona has demonstrated a relatively consistent approach to dividends over the span of the provided data which covers 17 years. However, there were instances where dividends were cut drastically or omitted altogether (notably in 2014). The fluctuations in dividend per share, such as the decline between 2009 and 2010, and the significant jumps in 2016 and 2022, indicate potential volatility. Inconsistent dividends may make the stock less attractive to investors seeking stable and steady income. Thus, while Acciona has shown a commitment to dividends, the inconsistency over the examined period suggests a mixed trend that could raise concerns for dividend-oriented investors.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases refer to a company buying back its own shares from the market. It is important to consider because it can indicate a company’s confidence and financial stability, and can also improve financial ratios such as earnings per share.

Based on the provided data, Acciona (AJ3.F) does not show a consistent trend of stock repurchases over the last 20 years. The number of shares remained constant from 2007 to 2012, dropped to zero from 2013 to 2016, increased slightly in 2017, decreased again in 2018, and showed minor fluctuations from 2019 onwards. The average repurchase rate over the last 20 years was -6.52%, indicating more issuance than repurchases. Reliable stock repurchases were only carried out in 2013 and 2018, which is not frequent enough to be considered a reliable pattern. This trend is generally considered bad as it reflects an inconsistent policy towards stock repurchases, possibly indicating fluctuating confidence in financial stability or a strategic plan not heavily reliant on repurchases.