Last update on 2024-06-27

Alstom (AOMD.DE) - Dividend Analysis (Final Score: 4/8)

Analyze Alstom (AOMD.DE) dividend performance and what the score of 4/8 means. Explore dividend stability, payout ratios, growth rates, and yield comparison.

Short Analysis - Dividend Score: 4

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

The dividend analysis for Alstom (AOMD.DE) uses an 8-criteria scoring system to evaluate the performance and stability of its dividend policy. Here's a summary based on the criteria: 1. **Dividend Yield**: Alstom's current dividend yield (2.0492%) is higher than the industry average (1.47%), which is a positive indication for income-focused investors. 2. **Dividend Growth Rate**: The company's average dividend growth rate is -11.20% over the last 20 years, showing inconsistency and a declining trend, which is concerning for long-term dividend growth seekers. 3. **Payout Ratio**: Alstom’s average payout ratio is 7.67%, indicating a conservative approach, but recent negative payout ratios suggest financial distress in some years. 4. **Dividends Covered by Earnings**: The dividend coverage from earnings has been inconsistent, with recent years showing concerning low or negative ratios, indicating potential sustainability issues. 5. **Dividends Covered by Cash Flow**: The coverage by free cash flow has been volatile, with several years showing negative cash flows, pointing to instability in maintaining consistent dividend payments. 6. **Stable Dividends**: Alstom’s dividends have been highly irregular over the past 20 years, with frequent periods without any dividends and substantial drops more than 20% in different years. 7. **Dividends Paid for Over 25 Years**: The criterion wasn't strictly assessed, but Alstom does not appear to meet this criterion based on the provided history. 8. **Reliable Stock Repurchases**: Alstom has shown intermittent stock repurchases, contributing positively to shareholder value, but with some inconsistency.

Insights for Value Investors Seeking Stable Income

Based on the analysis, while Alstom (AOMD.DE) has a higher than average dividend yield, the overall inconsistency in dividend growth, payout sustainability, and coverage by earnings and cash flow raise several red flags. The company's dividend policy appears unstable and not consistently reliable for long-term, income-focused investors. Although there is a conservative payout ratio and some positive stock repurchase activities, the potential financial distress in recent years hinders reliability. If you're looking for consistent and growing dividends, a more stable investment might be worth considering. However, for those seeking potential high yield and are okay with volatility, further investigation could be warranted.

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 being higher than the industry average

Alstom's current dividend yield stands at 2.0492%, which is notably higher than the industry average of 1.47%. This is considered a positive sign as it suggests that Alstom provides a better dividend return compared to its peers. Over the last 20 years, Alstom's dividend yield has fluctuated significantly, peaking at 3.3671% in 2008 and hitting a low of 0% during multiple years. Notably, the company did not provide dividends in several years but has shown a rebound in recent years, with yields of 1.0874% in 2022 and 2.0492% in 2023. When compared to the industry, Alstom's yield has generally been higher during its paying years, except during very high industry yields such as in 2018 when the industry average was 6.07%. Overall, this positive trend in dividend yield is a beneficial indicator for potential investors looking for income-generating investments.

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

The Dividend Growth Rate is an essential measure for understanding a company's ability to increase dividend payments over time, indicating its financial health and shareholder value creation.

Analyzing the dividend per share ratio for Alstom (AOMD.DE) over the past 20 years, it is evident that the company has a highly inconsistent dividend policy. The average dividend ratio stands at -11.20%, which indicates a declining trend in dividends. There were several years (2009, 2011, 2013, 2015, and 2019) with negative ratios (reduced dividends), including three years with almost complete elimination of dividends. Years with positive dividend ratios (2010, 2012) also do not demonstrate sustained growth. Thus, the dividend growth rate is not only lower than 5%, but shows an overall negative trend, which could be concerning for long-term investors seeking dividend growth.

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

The payout ratio measures the percentage of earnings paid to shareholders in dividends. A ratio below 65% is generally considered sustainable and indicates dividend safety and potential for growth.

The average payout ratio for Alstom over the last 20 years has been 7.67%, which is significantly lower than the 65% threshold. This indicates a strong trend where the company has consistently maintained a conservative approach to paying out dividends relative to its earnings. Such a low average payout ratio suggests that Alstom emphasizes retaining earnings for reinvestment and growth over distributing high dividends. Moreover, a low payout ratio usually signals a potential for future dividend increases, as the company has ample room to maneuver financially. However, it's also noted that in several years, the payout ratio was zero, and even negative in the latter years (-16.04 in 2022 and -71.12 in 2023). These anomalies hint at possible financial distress or losses during these periods, which might have affected the ability to pay dividends. Overall, while the low average payout ratio is a positive indicator, the recent negative ratios warrant further investigation.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings means that the company is generating enough earnings per share (EPS) to comfortably pay out its dividends to shareholders. It is a key measure of dividend sustainability.

Examining Alstom's earnings per share (EPS) and dividend per share from 2003 to 2023 reveals a mixed picture regarding the sustainability of its dividend payments. Specifically, during the years when dividends were paid (2008-2011, 2017, 2021-2023), the dividend coverage ratio (dividends per share covered by EPS) fluctuated significantly: - In 2008, the coverage was 0.50, meaning that earnings could cover only half of the dividend payout, indicating a strain on resources. - The coverage dropped further in 2009 to 0.27 and remained concerningly low in 2010 at 0.28. This modest coverage ratio indicates that the dividend payout was not comfortably supported by earnings. - From 2011 to 2020, and intermittently in other years, either dividends were not paid or the ratios hovered near zero, resulting in no effective coverage. - In recent years, 2022 (0.26) demonstrated marginal improvement, but 2023 saw a negative coverage ratio, indicating that the company did not generate sufficient earnings to pay the dividends. These figures collectively suggest Alstom's dividends are not consistently well-covered by earnings, raising concerns about the sustainability of dividend payouts without drawing on other resources or adjusting the payout policy.

Dividends Well Covered by Cash Flow?

How consistently a company's free cash flow can cover dividend payouts is paramount since dividends represent a tangible return to shareholders, and consistent or growing dividends are often sought by investors as a sign of financial health and stability.

The analysis of Alstom's free cash flow (FCF) covering its dividend payouts reveals a mixed performance over the studied years. Notably in 2003, 2004, 2005, Alstom had negative cash flows (-€947M, -€1.312B, -€681M respectively), and even though the dividend payout was relatively small (€1.08M, €3M, €5M), it wasn't covered by FCF, demonstrating percentages of -0.001, -0.002, k -0.007 respectively, signaling financial strain. In contrast, 2006, 2007, and several other subsequent years witnessed positive trends where FCF covered dividend payouts comfortably (0.008 in 2006 & 0.52 in 2019). A significant peak is observed in 2020 (6.138) after a substantial dip into negative realms in 2018 (-2.67B FCF with €12M payout). However, recent trends in 2021 and 2022 show adverse performance again. Such volatility highlights concerns over the company's cash flow stability which could distress consistent dividend payments. Investors should be cognizant of these patterns to understand the risks tied to Alstom's dividend consistency.

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.

Examining the dividend per share data for Alstom (AOMD.DE) over the past 20 years, we can observe several periods with substantial irregularities. Notably, between 2003 and 2008, there were no dividends declared, followed by a sudden distribution of €1.4883 per share in 2008. This was followed by continuous, though rather volatile, dividend payments up until 2013, where we observe decreases and overall instability in the amounts paid out. For instance, a significant drop from €1.4883 in 2008 to €1.0418 in 2009 and from €1.1534 in 2010 to €0.5767 in 2011 can be noted. Additionally, entire years such as 2012, 2014, 2015, 2017, 2018-2020 saw no dividend distribution at all. The resumption of dividends in 2021 at €0.25, continuing at the same level through 2023, maintains better stability but showcases a disrupted historical streak. This inconsistency means the dividends dropped by more than 20% sporadically, which is unfavourable and disconcerting for income-seeking investors. The prominent gaps and volatility signal an unstable dividend policy over two decades, ultimately reflecting negatively under this criterion.

Dividends Paid for Over 25 Years?

Explain the criterion for Alstom (AOMD.DE) and why it is important to consider

Dividends Paid for Over 25 Years criterion assesses the consistency and reliability of a company's dividend payments over a long period. Achieving this consistency often indicates strong financial health and a shareholder-friendly approach.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that the company returns excess cash to shareholders and might help in propelling the per-share value over time. It's crucial in evaluating the firm's commitment to enhancing shareholder value.

Over the past 20 years, Alstom has engaged in stock repurchases during the years 2006, 2016, 2017, 2018, 2019, and 2020. This trend signifies intermittent, but somewhat recurring management's commitment to returning value to shareholders. Specifically, in 2016, 2017, 2018, 2019, and 2020, stock repurchases contributed to reducing the number of shares outstanding from 284.1 million in 2006 to 225.0 million in 2018, showing a more concentrated ownership. Despite the increases in the number of shares in other years, the average net repurchase value over the past 20 years calculates to 73.5666, which is a positive offset in the long run. However, the fluctuation in the number of shares—both substantial increases and decreases—implies a somewhat inconsistent approach. Overall, the trend seems beneficial but could be more reliable.