Last update on 2024-06-27

METRO (B4B.DE) - Dividend Analysis (Final Score: 4/8)

Comprehensive analysis of METRO (B4B.DE)'s dividend policy performance, with a final score of 4/8 based on 8 criteria. Detailed insights for potential investors.

Short Analysis - Dividend Score: 4

We're running METRO (B4B.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

METRO's dividend analysis shows an overall score of 4 out of 8, indicating an average performance. The company's dividend policy exhibits a high yield, especially in 2023, which surpasses the industry average significantly. However, this high yield appears inconsistent and may be a response to volatility in stock price. Notably, METRO has not shown a healthy average annual growth rate in dividends, failing to meet the 5% benchmark, and having several years with zero dividends. The payout ratio has been highly unstable with significant fluctuations, some of which exceed the sustainable threshold of 65%. The dividends are not consistently well-covered by earnings or free cash flow, adding to the uncertainty. Additionally, the company's history of dividend payments over the past 20 years shows inconsistency with no dividends paid for several years and no reliable stock repurchases, flagging a potentially unstable dividend policy. In essence, while METRO's recent high yield may be attractive, the overall dividend strategy lacks consistency and reliability, vital for long-term investors.

Insights for Value Investors Seeking Stable Income

Considering the volatility and inconsistency in METRO's dividend history, it might be risky for investors seeking stable and long-lasting returns. The erratic payout ratios, unsustainable yields, and lack of reliable stock repurchases mean potential investors should approach with caution. It may be worth investigating other companies with a more dependable and predictable dividend policy. If high short-term yields are appealing, METRO could be considered, but for long-term stability and growth, more reliable alternatives should be preferred.

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 is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Considering the data from the last 20 years, METRO's dividend yield hit a significant peak of 14.58% in 2023, notably higher than the industry average of 2.25%. Historically, METRO had no dividend yield from 2014 to 2017, followed by relatively moderate yields from 2018 to 2021, and a lack of dividends in 2022. The company seems to be leveraging high dividend yield as a strategy to attract or retain investors. The steep increase in 2023 could be an attempt to compensate for the reduced stock price ($6.31), potentially indicating financial turbulence or a strategy to deliver value back to shareholders in dire circumstances. While a high dividend can be lucrative for income-focused investors, sustainability remains a concern given past inconsistencies and fluctuating stock prices. Thus, this trend could be perceived as opportunistic rather than a solid foundation for long-term yields.

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

Dividends are a portion of a company's earnings that are paid out to shareholders. A higher dividend growth rate is generally a positive signal as it indicates that the company has been growing its profits and is confident about its future earnings. A 5% growth rate is considered a healthy benchmark for a company to sustain and grow its dividend payments over the long term.

To analyze METRO's dividend growth rate, we examined the dividend payments from 2014 to 2023. A visible trend shows significant inconsistency in dividend payouts with most years having zero dividends and 2022 showing a -100% return. The average dividend ratio stands at -10.0. Given these figures, METRO clearly does not meet the 5% growth benchmark and the trend is negative. This volatility and overall negative trend can be alarming for potential investors seeking stable dividend growth.

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

Payout Ratio lower than 65% over the last 20 years.

Analyzing METRO's payout ratio over the recent years reveals a notable volatility. Significantly, years 2014-2017 didn't exhibit any payouts, showing a 0% ratio. By 2018, there was a substantial rise to 73.8864%, breaching the 65% threshold which isn't typically sustainable in the long-term. The year 2019's -201.7291% reflects dire financial distress potentially because of net losses exceeding dividends paid. After enjoying a healthier payout ratio at 55.253% in 2020, the trend veered negatively to an extraordinary -453.9559% in 2021. This bounce reflects an ongoing erratic payout scenario.Though the year 2022 again shows no payouts, the upwards tick to 76.0959% in 2023, surpassing the 65% barrier, appears unsustainable for maintaining stable dividends. Given the highly negative average payout of -45.045%, volatile-performance suggests scrutiny given its impact on potential future payout predictability. Additionally, continuous negative payout ratios may forecast potential dividend cuts or suspensions. Overall, the erratic trend and poor payout ratio do not provide a stable outlook.

Dividends Well Covered by Earnings?

Discuss the principle of dividends being well covered by earnings in a financial analysis.

The idea that dividends should be well covered by earnings means that a company must have sufficient net income to pay the dividends it commits to its shareholders. The dividend payout ratio, which measures dividends as a percentage of net income, is a common metric used to assess this. A lower ratio indicates that earnings are comfortably covering the dividend, suggesting financial health and dividend sustainability.

Dividends Well Covered by Cash Flow?

Explain the criterion for METRO (B4B.DE) and why it is important to consider

Free Cash Flow (FCF) is a measure of a company’s financial performance. It shows the cash that the company is able to generate after meeting its capital expenditure. A sufficiently high FCF enables a company to pay dividends, buy back shares, or reinvest in its business. For dividends to be considered safe and sustainable, they should ideally be well covered by the FCF. This is measured by calculating the ratio of the dividend payout amount to FCF.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for METRO (B4B.DE) and why it is important to consider

Stable Dividends Over the Past 20 Years measures whether the dividend per share has remained consistent without significant drops, specifically a drop of over 20%. This is crucial for income-seeking investors who rely on dividends for consistent income.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years refers to the consistency and reliability with which a company pays dividends to its shareholders over a long period, generally indicative of financial stability and shareholder value creation.

METRO AG (B4B.DE) has shown a mixed trend in its dividend payments over the past decade, with no dividends paid from 2014 to 2017. Dividends were resumed in 2018 at €0.7 per share and maintained this rate until 2020. After a hiatus in 2022, dividends spiked to €0.92 in 2023. These fluctuations suggest uncertainty in payout consistency, which could be a red flag for investors seeking long-term passive income. A more stable, predictable payment is generally preferred for this criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's commitment to returning value to shareholders. It often reflects confidence in the company's future performance and a preference for shared value instead of retaining excess cash.

The data indicates that METRO (B4B.DE) has not undertaken any stock repurchases in the past 20 years, as evidenced by the consistent number of shares (363,097,253) from 2014 to 2023 and no reliable repurchase years. An average repurchase amount of 0.0 further reinforces this interpretation. This lack of repurchase activity can be viewed negatively by shareholders who might prefer stock repurchases as a method of increasing shareholder value. It suggests that METRO has either retained cash for reinvestment in its operations, or distributed profits via other means such as dividends. Comparing this trend with industry standards and shareholder expectations will provide further insights.