Last update on 2024-06-28

Activision Blizzard (ATVI) - Dividend Analysis (Final Score: 5/8)

Detailed analysis of Activision Blizzard's (ATVI) dividend performance. Evaluated on 8 criteria with a final score of 5/8. Dig into ATVI's dividend policies.

Short Analysis - Dividend Score: 5

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

Activision Blizzard's dividend policy gets a score of 5 out of 8 based on their analysis criteria. Here's a summary of the findings: The company's dividend yield is lower than the industry average, making it less attractive for income-focused investors. The dividend growth rate does not consistently exceed 5% and is erratic, which is not ideal for those seeking predictable income. However, ATVI has a low payout ratio (16.29%), suggesting a focus on reinvestment and financial growth. Dividends are sufficiently covered by earnings and cash flow, reflecting a stable financial condition overall. Dividend payments have been stable since 2010 with no significant drops, although ATVI does not meet the 25-year payment criterion. The company has not consistently prioritized stock repurchases, showing mixed trends over the past 20 years.

Insights for Value Investors Seeking Stable Income

If you're a growth-focused investor, Activision Blizzard might be worth considering due to its strong stock price growth and low payout ratio, indicating more funds being reinvested. However, if you are a conservative or income-focused investor, there are concerns. The dividend yield is below the industry average and the dividend growth rate is inconsistent. Also, the company’s dividend payment history is just over a decade, which might not be long enough for those seeking a longer track record. Due to these factors, it may be more suitable to look for alternatives if regular income and long-term stability in dividends are your primary objectives.

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?

The dividend yield is a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. It is important because it helps investors understand the relative return they can expect from holding a stock in terms of dividends alone.

As of 2022, Activision Blizzard's (ATVI) dividend yield stands at 0.614%, compared to the industry average of 1.51%. Historically, ATVI's dividend yield has seen considerable fluctuation – peaking at 1.6949% in 2012. Importantly, since initiating dividends in 2010, ATVI's yield has mostly been close to or underperforming the industry average. For instance, in 2021, ATVI had a yield of 0.7064% against an industry average of 2.61%. Given that dividend yield is closely tied to the stock price, while ATVI's yield has lagged behind industry averages, its stock price has shown impressive growth—from $3.41 in 2003 to $76.55 in 2022. This suggests that the company is likely focusing more on reinvesting earnings to fuel growth rather than on distributing a substantial portion as dividends. This strategy might attract growth-focused investors rather than those seeking regular income. However, for conservative or income-focused investors, ATVI's lower dividend yield could be less appealing. Overall, this trend indicates a balanced approach where ATVI is seeking to maintain competitive returns while investing in future growth.

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

The Dividend Growth Rate is higher than 5% in the last 20 years

To determine whether Activision Blizzard's (ATVI) dividend growth rate is above 5% in the last 20 years, we would need consistent data indicating annual increases. However, the provided dividend per share growth values are inconsistent, with many years showing no dividend at all (e.g., 2003-2010, 2022). Where dividends exist, they vary widely, ranging from little over 0 (sporadically) to double digits (9-15%). The average dividend ratio over these years is 6.046975, but this alone doesn’t confirm a growth rate above 5% due to the inconsistent payment history. The erratic dividend policy makes it less reliable for income-focused investors seeking consistent growth. Consequently, the dividend growth rate does not consistently exceed 5%, and this trend is a concern for those prioritizing dividend predictability.

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

The payout ratio measures the proportion of earnings a company pays to its shareholders in dividends.

Activision Blizzard's average payout ratio over the last 20 years has been 16.29%, well below the 65% threshold. This is a positive trend because a lower payout ratio indicates that the company is retaining more of its earnings for reinvestment, which can drive future growth and financial stability. The only exception was in 2017 when the payout ratio spiked to 84.18%, which could have been due to extraordinary circumstances. Aside from that, the relatively low payout ratio over such a long period reflects a prudent approach to dividend payments.

Dividends Well Covered by Earnings?

Dividends well covered by earnings means that the company generates sufficient earnings to comfortably pay out its dividends. It is an important indicator of dividend sustainability and overall financial health.

The trend shows that except for a few years, Activision Blizzard had sufficient earnings to cover the dividends. For instance, in 2010, the dividends per share covered by earnings per share was 0.44, while in 2016, it climbed to approximately 0.20. A ratio below 1 shows caution is needed, whereas negative values such as in 2008, where the earnings per share were negative, indicate financial struggle. Recent values around 0.14 to 0.245 exhibit that dividends are covered but at a lower margin, suggesting a need to monitor earnings closely to avoid payout cuts. This trend is moderately concerning as the coverage ratio is not particularly high, highlighting a fragile balance that could impact future dividend policies.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow (Free Cash Flow) ensures that the company is generating enough cash from its operations to sustain its dividend payouts. This is crucial for the stability and reliability of dividend payments as it indicates the company can pay dividends without relying on external sources.

Activision Blizzard's analysis of dividends covered by free cash flow over the years shows an improving trend, although with some fluctuations. The company's free cash flow has shown substantial growth, starting from as low as $55.4 million in 2003 to $2.129 billion in 2022. On the other hand, the dividend payout amount has relatively been modest in comparison, growing from $189 million in 2010 to $367 million in 2022. The ratio of dividend payout covered by free cash flow averaging around 15-20% in the latter years demonstrates a good coverage, ensuring the company’s operations are generating sufficient cash to cover its dividend obligations sustainably. This trend suggests a good financial health for sustaining future dividends barring any significant downturns in free cash flow.

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.

An examination of the dividend per share over the past 20 years for Activision Blizzard (ATVI) shows that the company has consistently increased its dividends. Starting from 2003 up to 2009, there were no dividend payments. However, post-2009, the dividend per share rose from $0.15 in 2010 to $0.47 in 2021, demonstrating a steady increase. Importantly, there were no significant drops of more than 20% in any given year, maintaining the stability that income-seeking investors prioritize. This trend is favorable for investors looking for reliable dividend income, affirming that ATVI has a stable dividend policy. Hence, there were no years where the dividend dropped by 20%.

Dividends Paid for Over 25 Years?

Analyzing whether a company has paid dividends consistently for over 25 years is crucial in evaluating its long-term financial stability, commitment to returning capital to shareholders, and overall business health.

The data shows that Activision Blizzard (ATVI) has paid dividends consistently only since 2010. The starting annual dividend was $0.15 per share, progressively increasing to $0.47 per share by 2021 and 2022. However, the company does not meet the 25-year criterion for dividend payment. This trend suggests that while Activision Blizzard has demonstrated a solid commitment to increasing dividends each year since it began paying them, it lacks the long history of dividend payments. This absence may be a concern for some long-term, income-focused investors who prioritize companies with longer dividend histories.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate strong financial health and consistent shareholder returns.

Over the past 20 years, Activision Blizzard (ATVI) shows a mixed trend in share repurchases. From 2008 to 2013, the company reduced its shares significantly, from 1.31 billion to 726 million. Subsequently, share counts saw minor increases but remained below previous levels, indicating reliable repurchases primarily concentrated in 2010-2014. This suggests a period of strategic repurchases aimed at enhancing shareholder value. However, the overall average repurchase rate of 3.4309% over 20 years is relatively modest. This trend, while favorable during specific intervals, indicates that repurchases haven't been consistently prioritized over the long term, raising questions about ongoing capital allocation strategies.