Last update on 2024-06-27

Amcor (AMCR) - Dividend Analysis (Final Score: 4/8)

Analyze the dividend performance and stability of Amcor (AMCR) with our comprehensive 8-criteria scoring system. Final Score: 4/8

Short Analysis - Dividend Score: 4

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

The analysis measures Amcor (AMCR) against eight criteria to determine the performance and stability of its dividend policy. These include comparisons with industry averages, growth rates, payout ratios, coverage by earnings and cash flow, stability over time, and practices like share repurchasing. Here is a concise breakdown: - **Dividend Yield**: Amcor's yield (5.1245%) is better than the industry average (2.77%), indicating an attractive investment for dividend seekers. - **Dividend Growth Rate**: With a fluctuating growth average of only 3.9413% over 20 years, Amcor misses the 5% growth benchmark. - **Payout Ratio**: Averaging 47.41% over 20 years, it remains sustainable under the 65% threshold but has experienced spikes suggesting occasional financial stress. - **Coverage by Earnings**: The dividends are mostly well-covered by earnings, although some years depicted strained ratios. - **Coverage by Cash Flow**: Historically, Amcor’s dividends have generally been supported by cash flow, although recent years show minor strains. - **Stability in Payments**: Introduced only in 2013, the record shows both stability and a one-time 50% drop; post-2015 show a stable trend. - **Dividend Payment History**: Less than 25 years of consistent payments, as Amcor only began in 2013. - **Share Repurchases**: Demonstrates some regularity and proactive financial management with notable repurchase years.

Insights for Value Investors Seeking Stable Income

Given the findings, Amcor boasts a competitive dividend yield and generally sustainable payout ratios. However, its historical (and not exceptionally long) inconsistent growth rate and mixed coverage by earnings and cash flow suggest potential risks. Recent trends of stability in dividends and share repurchases are favorable for current times. Caution is advised due to the potential for financial strain, which suggests that while AMCR could be a decent long-term investment, potential investors should keep an eye on recent financial statements and signs of economic stress. A mixed bag worth a closer but cautious look.

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

Amcor's dividend yield of 5.1245% significantly surpasses the industry average of 2.77%, signifying an attractive yield proposition for investors. Over the past 10 years, the company's yield has shown a rising trend, peaking in 2019 at 5.203% before experiencing minor volatility and returning to high levels in 2023. This steady high yield indicates potential for continued dividend success, given its competitiveness against industry norms.

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

Dividend Growth Rate measures the yearly rate at which dividends paid by a company increase. A consistent growth rate of over 5% over the years indicates that the company is in a sound financial position.

Analyzing Amcor's dividend per share ratio over the last 20 years reveals significant fluctuations. Notably, the dividend per share ratio was mostly zero until a drastic -50.1266 in 2015, followed by an enormous 109.6447 in 2016 and varying rates thereafter. The average ratio of 3.9413%, which is below the 5% threshold, highlights that Amcor's dividend growth rate does not consistently exceed 5%. This sporadic behavior might be indicative of financial instability or strategic restructuring periods, making the dividend growth trend unfavorable.

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

The payout ratio gauges the proportion of earnings a company distributes as dividends to shareholders. A ratio under 65% is typically deemed sustainable over long terms.

The average payout ratio for Amcor (AMCR) over the last 20 years stands at approximately 47.41%, which is below the 65% sustainability threshold. This indicates a generally healthy and sustainable dividend payout. However, there have been notable spikes, such as 2015 (198.367%) and 2019 (154.775%), which suggest occasional financial strains. Despite these outliers, maintaining an average below the threshold is a positive indicator of Amcor's dividend sustainability over the long term.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that the company generates enough profit to comfortably pay its dividend. This is important because it indicates the dividend's sustainability and reduces the risk of a cut.

Amcor's coverage ratio over the period has displayed variability. In 2014 (EPS: 0.4331, DPS: 0.395), dividends were covered nearly 91%. By 2016, EPS stood at 0.2082 with a DPS of 0.413, leading to a 198% payout ratio, indicating dividends exceeded earnings. In recent years (2022: EPS: 0.5335, DPS: 0.483), the coverage was around 90.5%, showing stability. Overall, often maintaining around or above 1, a coverage ratio averaging above 50% suggests some years of stress but mainly called sustainable. Trends recently mostly show a well-positioned coverage but watch for years of extensive payouts.

Dividends Well Covered by Cash Flow?

Dividends covered by cash flow measure how well a company can afford its dividend payments out of its free cash flow. It's important as it indicates financial health and sustainability.

Analyzing the coverage of dividends by free cash flow for Amcor (AMCR), we observe fluctuations throughout the two decades. In the early 2000s, the company faced challenges, notably in 2003 where its coverage was -12.53 due to negative free cash flow. However, from 2004 to 2023, the trend generally demonstrated positive coverage, peaking in 2011 with a coverage ratio of 2.67. The coverage ratios are mostly above 0.5, indicating a reasonable ability to cover dividends though the figures portray some vulnerability especially in more recent years as it hovers close to 1.0. In 2023, the ratio is 0.98, slightly below 1.0, suggesting minor strain on cash flow to dividend payouts, a risk area to monitor. Overall, this trend indicates satisfactory, albeit fluctuating, performance in covering dividends with cash flow over the years.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends refer to the consistency of dividend payments, which signifies the company's ability to generate steady cash flow. It is reassuring for income-focused investors, signaling reliable income and financial health.

Examining Amcor's dividend per share over the past 20 years: initially, up to 2012, there were no dividends paid. Starting in 2013, dividends were introduced and have shown relative growth, with no significant drop observed that surpasses a 20% decrease within a year. The closest notable drop occurred between 2015 and 2016, where dividends decreased from $0.395 to $0.197, a significant drop of approximately 50%. However, this was an isolated event and not indicative of a longer-term trend. Post-2015, Amcor's dividends show an overall upward trajectory with slight fluctuations but no dramatic decreases. Therefore, to income-seeking investors, this later period provides a picture of a more stable and growing dividend performance. Because of the initial lack of dividends and one significant drop, the overall stability is mixed; however, the recent trend is more encouraging and shows stability post-2015.

Dividends Paid for Over 25 Years?

Explain the criterion for Amcor (AMCR) and why it is important to consider

This criterion checks if Amcor has consistently paid dividends for over 25 years. A long history of consistent dividends can indicate the company's financial stability and its commitment to returning value to shareholders. It also shows resilience in various market conditions.

Reliable Stock Repurchases Over the Past 20 Years?

Share repurchases indicate a company's confidence in its own financial health and can enhance shareholder value. Regular buybacks can signal healthy cash flow.

Over the last 20 years, Amcor has shown a trend of share repurchase in multiple years, with notable reductions in shares outstanding during several periods. With an average repurchase rate of 2.5106, the company has demonstrated a commitment to returning value to shareholders. Key repurchase years include 2008 (from 1,017 million to 992 million shares), 2009 (from 992 million to 963 million shares), and more recent years such as 2021, 2022, and 2023. This trend is generally positive, reflecting proactive financial management and investor confidence. However, the years 2010-2011 saw an increase in shares, potentially diluting value.