Last update on 2024-06-27

ASML Holding (ASML) - Dividend Analysis (Final Score: 4/8)

Explore the dividend performance and stability of ASML Holding (ASML) using an 8-criteria scoring system in this comprehensive analysis.

Short Analysis - Dividend Score: 4

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

Here's a summary of ASML Holding's dividend analysis based on 8 criteria: 1. **Dividend Yield:** ASML's dividend yield of 0.9435% surpasses the industry average of 0.34%, indicating it may be an attractive income opportunity. However, historical fluctuations should be reviewed. 2. **Dividend Growth Rate:** The 20-year analysis shows an average growth rate of 125.941%, but it's inconsistent with some years showing negative growth, making reliable future growth questionable. 3. **Payout Ratio:** The average payout ratio is 87.2%, which is high and suggests a significant return of earnings to shareholders, but also shows volatility with high and negative values in some years. 4. **Earnings Coverage:** This criterion was mentioned but no specific data was provided, so it's important for investors to review if ASML’s earnings are sufficient to cover dividends. 5. **Cash Flow Coverage:** ASML has improved in recent years and shown strong coverage ratios from 2019 onwards, which suggests financial robustness in covering dividends. 6. **Stability:** ASML shows moderate stability with no drops of over 20% in dividend per share, but historical fluctuations suggest caution. 7. **Dividend History:** ASML has been paying dividends for 18 years, not quite meeting the 25-year mark, and shows a trend of increasing shareholder value despite some inconsistencies. 8. **Stock Repurchases:** ASML has shown a generally positive trend in stock repurchases over the past 20 years, signaling strong cash flows and a commitment to returning value to shareholders, despite some fluctuating periods.

Insights for Value Investors Seeking Stable Income

Based on the analysis, ASML Holding shows a mix of strengths and weaknesses. The attractive dividend yield and improved cash flow coverage in recent years are promising signs for potential investors. However, the inconsistency in dividend growth, high payout ratio, and less than 25 years of dividend history suggest cautious optimism. If you are considering investing in ASML, it would be wise to review its financial health comprehensively and consider the company's ability to maintain stable and consistent dividend payouts. Current trends look positive, but past fluctuations should be kept in mind.

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 compares a company's annual dividend payout to its stock price. A higher yield can indicate a potentially higher return on investment.

ASML’s current dividend yield of 0.9435% surpasses the industry average of 0.34%. Over the past 20 years, ASML’s dividend yield has exhibited substantial fluctuations, peaking in 2008 at 37.6846%. Recent data shows stability, albeit below historical peaks. This yield outperformance suggests a relatively attractive income opportunity for investors, particularly given that lower yields typically indicate less efficient dividend-producing capabilities of the industry. Though the trend has stabilized, investors should review yield fluctuations in conjunction with stock price movements and dividend per share to ensure comprehensive analysis.

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

The dividend growth rate over the past 20 years should be higher than 5%.

By analyzing ASML Holding's dividend per share ratio over the past 20 years, we observe considerable variation. Notably, years such as 2007, 2012, and 2022 exhibit negative ratios, indicating interruptions. The aggregate average dividend ratio stands at 125.941%, signifying high growth when observed as an absolute value. However, the inconsistency in annual figures underscores volatility that calls into question sustainable and reliable growth. Thus, while the trend is positive in terms of annual averages, it is inconsistent, and overall it may not reliably meet the targeted 5% annual growth rate.

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

What does the Average Payout Ratio being lower than 65% mean and why is it important for ASML Holding (ASML)?

Analysis of the provided data reveals that the average payout ratio for ASML over the past 20 years is 87.2%. A payout ratio above 65% is generally considered high, suggesting that ASML is returning a substantial portion of its earnings to shareholders as dividends. However, the dispersion in these values includes some exceptionally high and negative values which skews the average. Specifically, in years like 2006, 2007, 2008, 2012 the payout ratio was disproportionately high and sometimes negative indicating either fluctuating earnings or special circumstances impacting dividend payouts for ASML. A high payout ratio might indicate limited reinvestment opportunities but it can also suggest prudence in returning cash to shareholders when few high-ROI projects are available. However, consistently high payout ratios need to be balanced with sustainable earnings to avoid jeopardizing future growth.

Dividends Well Covered by Earnings?

Explain the criterion for ASML Holding (ASML) and why it is important to consider

This criterion evaluates whether a company's earnings are sufficient to cover its dividend payments. If dividends are well covered by earnings, it indicates a lower risk of the company having to cut dividends due to insufficient earnings. This is an important measure of a company's financial health and dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is essential because it indicates a company's ability to sustain its dividend payments from its operating cash flow, ensuring long-term dividend safety and potential growth.

Analyzing the historical data of ASML Holding (ASML), we observe that the company has fluctuated in its ability to cover dividends with its free cash flow. Initially, there were years where the company paid no dividends (2003-2007). From 2008 onwards, while the ratios were relatively low and even negative in some years (e.g., 2009), there was a significant improvement over time, especially from 2019 onwards. In recent years, ASML has demonstrated stronger coverage ratios, with the ratio notably reaching as high as 72.3% in 2023. This trend suggests that ASML's free cash flow is increasingly able to cover its dividend payouts, reflecting a healthy financial standing. Specifically, from 2019 onwards, the consistent increase in coverage ratio indicates a positive trend. Therefore, the recent trend of dividends being well covered by cash flow appears favorable for ASML. Such improvement highlights the company's robust growth in generating free cash flow, which is a positive signal for dividend investors.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate consistent earnings and financial health, making the company reliable for steady income.

ASML Holding has shown inconsistency in its dividend payout over the past two decades. Despite fluctuations, the dividend per share has not dropped by 20% in any given year. This could be attributed to ASML's dynamic growth phases and adaptation to market conditions. Notably, years like 2007 (6.84), 2008 (4.87), and 2009 (0.27) revealed significant changes, which are concerning for stability seekers. However, the general upwards trend post-2013 implies potentially stabilized earnings moving forward. Given that there hasn't been exactly a 20% drop, ASML exhibits moderate stability.

Dividends Paid for Over 25 Years?

Explain whether the company has been paying out dividends for over 25 years. This criterion involves the consistency and reliability of dividend payments, indicating financial health and shareholder value.

ASML has not been paying dividends for over 25 years. From the data, dividends were paid only from 2005 onwards, with a notable increase over the last 18 years. This trend is good as it shows a growing commitment towards shareholder value, but it falls short of the 25-year mark, indicating that ASML is relatively young in terms of dividend history. Furthermore, the fluctuations, especially the spike in 2012 followed by inconsistency, might raise concerns. Consistent payments provide greater confidence in a company's financial stability.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchase programs can signal a company's confidence in its future prospects and potentially enhance shareholder value.

ASML's stock repurchase over the past 20 years shows a mixed pattern but leans towards positive implications. The company has reliably decreased its outstanding shares in several years, such as in 2006, 2008, 2009, 2011, 2015, 2016, 2018, 2019, 2020, 2021, 2022, and 2023. Over the 20-year period, the average repurchased shares per year stands at 1.165%. This trend is good as it may indicate the company's consistent commitment to returning value to shareholders through stock buybacks, signaling strong cash flows and a focus on shareholder returns. However, fluctuations in the years like 2004, 2007, and 2012, where the number of shares increased, suggest periods of stock issuance or lower buyback activities.