Last update on 2024-06-28

Elevance Health (ANTM) - Dividend Analysis (Final Score: 3/8)

Detailed analysis of Elevance Health (ANTM) dividend policy, achieving a score of 3 out of 8 for performance and stability, based on 8 essential criteria.

Short Analysis - Dividend Score: 3

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

Elevance Health's (ANTM) dividend policy analysis shows mixed results when evaluated on eight criteria. The company’s dividend yield was often higher than the industry average, indicating better income-generating potential. However, the yield dropped to zero in 2022, raising concerns. The annual growth rate for dividends has been erratic, with wild fluctuations including a total cut in 2022. Payout ratios have generally been low, indicating that the company retains enough earnings for growth. Both earnings and cash flow have typically covered dividends well, showing strong financial health. Nonetheless, dividends were only introduced in 2011, and inconsistent dividend payment trends could worry long-term investors. Stock repurchasing has been steady, which is a good sign.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Elevance Health shows some strong points, like consistent stock buybacks, low payout ratios, and sound cash flow coverage. However, the inconsistencies in dividend payments, especially the drop to zero in 2022, raise concerns. It may still be worth exploring for investors who focus on factors other than just stable dividends, such as stock buybacks and lower payout ratios. For those who heavily rely on consistent dividend income, this stock might be too risky.

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 shows how much a company pays in dividends relative to its stock price. It helps investors understand the income they might generate from owning shares.

Elevance Health's dividend yield over the last 20 years has shown significant variation. Notably, the company only started offering dividends from 2011 onwards, with initial yields of around 1.5%. Over the years, the yield has fluctuated but has generally been above the industry average. For example, in 2012, Elevance's yield was 1.8894% compared to the industry average of 0.8%. This indicates that, at times, Elevance has provided better dividend income than the average company in its industry. However, the yield dropped to 0 in 2022, signaling a potential downturn or strategic shift, which may concern yield-focused investors.

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

Dividend Growth Rate serves as a critical marker in ascertaining the viability and appeal of a company to income-focused investors. A steady increase suggests robust financial health, revenue growth, operational efficiency, and a shareholder-friendly policy.

Analyzing the data, Elevance Health has demonstrated erratic dividend growth rates over the last 20 years. For instance, in 2011, the dividend per share ratio was 15.1, which spiked to 30.3215 in 2013 and further saw volatility with a -100% change in 2022. Such irregularities indicate inconsistent financial planning or reactions to market conditions, both of which may be a red flag for potential investors. The highly fluctuating dividend figures, especially the extreme swing in 2022, make it challenging to ascertain a stable growth path for the company's dividends. While the average ratio is 3.41185, this metric alone isn’t very informative given the pronounced volatility; consistency in dividend growth is key for long-term investor confidence.

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

A payout ratio below 65% implies the company is retaining more earnings to reinvest in growth. High ratios can signal vulnerability in maintaining dividends.

The average payout ratio over the last 20 years for Elevance Health (ANTM) stands at 10.86%, which is significantly lower than the 65% threshold. This trend is positive as it indicates the company has retained a substantial portion of its earnings, providing flexibility for reinvestment in business growth, acquisitions, or cushioning against economic pressures. Specifically, Elevance Health began paying dividends in 2011, and since then, the payout ratio peaked at 28.22% in 2016, still well within a comfortable range. This conservative payout strategy positions the company favorably for long-term financial health.

Dividends Well Covered by Earnings?

Earnings per Share (EPS) is a critical measure to assess because it indicates how much profit a company generates on a per-share basis. It is essential for determining if a company can cover its dividend payouts from its net income, ensuring financial stability and sustainability of the dividends.

Elevance Health (ANTM) demonstrated a fluctuating EPS throughout the years, showing a peak in 2021 at $24.7326 and a dip in 2009 at $6.9435. Consistently high EPS levels, especially in recent years, indicate strong profitability, thereby enhancing the company's ability to cover its dividend payments. This is a positive trend for investors looking for reliable dividend income.

Dividends Well Covered by Cash Flow?

One of the critical elements in assessing the sustainability of a company's dividends is determining whether those dividends are well covered by cash flow.

Analyzing the data from 2003 to 2022, we can see that Elevance Health (ANTM) consistently maintained a free cash flow well in excess of its dividend payouts. The dividend payout ratio, which measures the proportion of cash flow dedicated to dividends, grew from 0.125 in 2011 to around 0.170 in 2022. While there's a significant jump in 2016 to 0.260, the ratio remains low, implying that the company retains sufficient cash for other purposes like reinvestment, debt repayment, or buffer for downturns. This healthy margin between free cash flow and dividends indicates a strong potential for Elevance Health to sustain or even augment its dividend payouts, a positive trend for dividend-investing strategies.

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.

Reviewing the dividend per share data for Elevance Health (ANTM) over the past 20 years, we note a significant fluctuation at the very end, where dividends dropped to zero in 2022, after reaching $4.52 in 2021. Steady growth was observed from 2010 to 2021. However, such a drastic cut to zero concerns any income-seeking investors, as it indicates potential instability. This trend signals uncertainty and could be perceived negatively by investors who rely on dividends for predictable income.

Dividends Paid for Over 25 Years?

The consistency of dividend payments over an extended period is crucial for investors seeking reliable income. Companies maintaining dividends for over 25 years demonstrate financial stability and a shareholder-friendly approach.

The analysis shows that Elevance Health (ANTM) has not paid dividends consistently since 1998. Only since 2011 has there been a trend of rising dividends per share, starting with $1 based on the year values given. The notable dip in dividends in 2022 to $0, after $4.52 in 2021, raises concerns about the company's commitment to its dividend policy. This inconsistency does not favor long-term dividend stability for investors. Hence, this trend is considered bad for the Vanishing Point's criteria of consistent dividends for over 25 years.

Reliable Stock Repurchases Over the Past 20 Years?

This criterion evaluates a company's consistency in buying back its own shares over an extended period, typically 20 years. Stock repurchases can positively impact earnings per share and indicate management's confidence in the company, thus it's important for investors.

Elevance Health has shown a strong trend of stock repurchases over the past 20 years, with significant reductions in the number of outstanding shares from 2003 to 2022. The company reduced its shares from 284.1 million in 2003 to 246.8 million in 2022. Notably, consistent buybacks were seen in key years, specifically from 2007 to 2021. The average repurchase rate is approximately 1.6364, highlighting the company's commitment to returning value to shareholders through stock buybacks. This trend is favorable, as it not only boosts earnings per share by reducing the share count but also reflects management's confidence in the firm’s future prospects. Overall, Elevance Health's reliable stock repurchase activities present a positive sign for potential investors.