Last update on 2024-06-28

Allegion (ALLE) - Dividend Analysis (Final Score: 7/8)

Analyze Allegion's (ALLE) robust dividend performance based on an 8-criteria scoring system, achieving a final score of 7/8 in 2023.

Short Analysis - Dividend Score: 7

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

Allegion (ALLE) earns a strong dividend score of 7 out of 8 possible points. It has a dividend yield of 1.4208%, which is significantly higher than the industry average of 0.75%. The company has been increasing its dividends since 2015, with substantial growth rates but some volatility. Its average payout ratio is 17.62%, well below the 65% benchmark, indicating solid retention of earnings for reinvestment. Most of the time, earnings have comfortably covered the dividends, even though coverage ratios below 1 can be a concern. The company's history shows an increasing dividend trend, despite a notable drop in 2022. Allegion might not have the 25-year history needed to be a 'dividend aristocrat,' but it has made reliable stock repurchases in recent years.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Allegion (ALLE) appears to be a solid investment for those seeking dividend income. Its high yield, consistent but sometimes volatile growth, and strong payout ratio are reassuring. However, considering the sharp decline in dividends in 2022 and the lack of a 25-year history, potential investors should keep a closer watch on overall market performance and company updates. If you’re looking for both growth and steady income, it’s worth keeping Allegion on your radar.

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 measures a company's annual dividend as a percentage of its stock price, providing insight into the income generated from owning a share. It is important as it shows the return on investment for dividend-seeking investors.

Allegion (ALLE) boasts a current dividend yield of 1.4208%, notably higher than the industry average of 0.75%. This ascent to a significant level reflects a progressive upward trend from 0.577% in 2014 to its current yield, hinting at consistent dividend enhancements. Comparatively, industry averages depict fluctuations with peaks like 5.42% in 2020 during market turmoil and the coronavirus outbreak. The gradual, consistent rise contrasts sharply with the industry’s volatility, suggesting Allegion’s underlying strength and commitment to shareholder returns. For investors targeting dependable income, ALLE's rising yield aligns well with sustaining and potentially enhancing profitability.

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

The Dividend Growth Rate over 5% in the last 20 years implies the company is consistently increasing dividends, which is a positive signal for investors.

From the provided dividend growth rates since 2010, it is clear that Allegion (ALLE) initiated its dividend payout in 2015 with a 25% growth rate which then showed varying rates over the years, peaking at 46.34% in 2023. However, there were also years with negative growth rates, such as -14.5833% in 2022. With an average dividend ratio of 14.35%, it seems that Allegion’s dividend growth is relatively volatile but generally positive. It should be noted that this average far exceeds the 5% benchmark for healthy growth, thus indicating a good trend for dividend increases despite intermittent fluctuations.

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

Payout Ratio signifies the proportion of earnings paid out as dividends to shareholders, and a lower ratio indicates higher reinvestment into the company.

The average payout ratio for Allegion over the last 14 years is approximately 17.62%, significantly below the 65% threshold. This low payout ratio suggests that the company is retaining a substantial portion of its earnings for reinvestment purposes, which is a good sign for growth prospects. Given that the ratio has been relatively stable and did not rise drastically in the observed period, it reflects a disciplined and sustainable dividend policy. Overall, this trend is quite positive for the company's long-term financial health and growth potential.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This metric evaluates whether the company's earnings per share (EPS) comfortably cover its dividend payments, highlighting the sustainability of the dividend payouts.

The historical values for Allegion's (ALLE) Dividends per Share covered by Earnings per Share show a variation in the coverage ratio from 0.177 in 2014 to 0.292 in 2023. These numbers indicate that in most years, earnings safely cover the dividends, ensuring their sustainability. The generally increasing trend, with minor fluctuations, supports a positive outlook as the company maintains a healthy balance between earnings and dividend distributions, suggesting prudent financial management. However, coverage ratios below 1 can be a concern as they may not be sufficiently secure, especially in tougher financial periods.

Dividends Well Covered by Cash Flow?

Explain the criterion for Allegion (ALLE) and why it is important to consider

The criterion of dividends being well covered by cash flow is crucial to evaluate because it indicates the company's ability to generate enough cash to cover its dividend payments. A company that can comfortably cover its dividends through its cash flow demonstrates financial health and sustainability. This criteria is particularly important for income-focused investors who seek steady and reliable dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends imply a reliable income stream and a company’s financial health.

Over the past 14 years, Allegion's dividend per share has been on a general upward trend, increasing from $0 in 2010 to $1.80 in 2023. The only notable drop is in 2022, where the dividend per share decreased to $1.23 from $1.44, more than a 20% decrease from the previous year. This drop could raise concerns about the company’s dividend stability, which is crucial for income-seeking investors. Overall, the trend is good due to the consistent growth, but the sharp decline in 2022 is a red flag.

Dividends Paid for Over 25 Years?

Explain the criterion for Allegion (ALLE) and why it is important to consider

It is essential to assess whether Allegion has paid dividends for over 25 years, as a long history of dividend payments indicates financial stability, profitability, and management's commitment to returning capital to shareholders. Companies with a strong dividend payment history are often regarded as more reliable investments, appealing particularly to income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Examines whether Allegion consistently repurchased its own shares over two decades.

Allegion has reduced its outstanding shares from 96 million in 2010 to 87.9 million in 2023, exemplifying consistent repurchasing, especially notable from 2015 onward with marked reductions in share count almost yearly. This trend is favorable, indicating effective capital return to shareholders, eps growth, and demonstrating management's confidence in the company's prospects.