Last update on 2024-06-27

Bechtle (BC8.DE) - Dividend Analysis (Final Score: 5/8)

Explore Bechtle (BC8.DE) dividend performance with a score of 5/8, analyzing payout stability, growth potential, and financial health for long-term investors.

Short Analysis - Dividend Score: 5

We're running Bechtle (BC8.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Bechtle (BC8.DE) using an 8-criteria scoring system shows a mixed performance with evident strengths and weaknesses. Over 20 years, Bechtle's dividend yield remains higher than the industry average but has declined significantly. While the average annual dividend growth rate exceeds 5%, it's inconsistent, suggesting potential volatility. The high payout ratio (103.75%) exceeds the preferred 65%, raising sustainability concerns. Although dividends were mostly covered by earnings, recent years show a worrying trend. The dividend coverage by cash flow is also erratic, indicating potential reliability issues. Bechtle has maintained stable dividends generally without more than a 20% annual drop, paid dividends for 23 years (close to 25), but has shown marginal and inconsistent stock repurchases.

Insights for Value Investors Seeking Stable Income

Bechtle (BC8.DE) shows a commitment to returning value to shareholders through dividends over the long term but has inconsistencies and sustainability issues. While the company presents a mostly stable dividend policy and growth rates higher than the industry average in some respects, the high payout ratio and recent declines in earnings relative to dividends pose risks. Investors seeking stable and growing dividends might need to closely monitor the company's financial health and payout strategies. For those looking for consistent stock repurchase programs, this may not be the ideal pick. Review quarterly reports and market conditions to make a more informed decision.

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 tells how much a company pays in dividends each year relative to its stock price.

Bechtle's dividend yield of 1.432%, despite being higher than the industry average of 1.12%, has shown a declining trend over the past 20 years—from as high as 26.3158% in 2008 to its current level. This drop signifies that either Bechtle's stock price increased significantly over time or their dividend payouts didn't keep the same pace as the stock price appreciation. However, maintaining a dividend yield above the industry average suggests relative financial stability, enhancing Bechtle's attractiveness to income-focused investors. While the downward trend may appear concerning, it can be seen as a reflection of Bechtle adapting to market dynamics or focusing on growth reinvestment.

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

The Dividend Growth Rate is a measure of the annualized percentage growth rate of the dividend payments made by a company to its shareholders. It is important because it shows the company's ability to consistently increase dividends over time.

Based on the provided data, Bechtle's dividend growth rate fluctuates significantly over the past 20 years, with some years showing substantial increases and others showing reductions or no dividends at all. The average dividend ratio of 7.87% suggests moderate growth; however, the inconsistency and negative growth years indicate potential volatility in dividend payouts. This volatility could be a concern for investors seeking stable and predictable dividend income, making the trend less favorable despite the average growth rate being above 5%.

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

The payout ratio is critical in assessing the sustainability of a company's dividend policy. It calculates the proportion of earnings a company pays its shareholders in dividends. A payout ratio under 65% is preferred because it suggests that the company retains enough earnings to reinvest in its own business and fund future growth. Higher ratios might indicate potential risks in maintaining dividend levels.

The average payout ratio of Bechtle over the past 20 years is approximately 103.75%, which substantially exceeds the prudent threshold of 65%. This high payout ratio can be concerning as it indicates that Bechtle has paid out more to its shareholders than it has earned. This unsustainable approach may necessitate either borrowing funds or using reserves to continue paying dividends. Moreover, in several years like 2003, 2004, 2008, 2009, 2010, 2012, 2013, and 2014, the payout ratio exceeded 100%, which stresses the unsustainability. Therefore, this trend is unequivocally negative.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Over the given period, Bechtle's dividends are considered well-covered if the Earnings Per Share (EPS) is higher than the Dividends Per Share (DPS). This criterion ensures that the company is generating enough profit to sustain its dividend payments, which is a sign of financial health and stability. It is generally considered a red flag if a company's dividends exceed its earnings, as this can indicate potential financial distress or unsustainability in maintaining the dividend payout.Based on the provided data, Bechtle's dividends have mostly been covered by its earnings, except for the recent years 2022 and 2023 where the ratio falls significantly below 1 (0.27596588058203714 and 0.308466211085801 respectively). Specifically:- For the years 2003 to 2021, the coverage ratio consistently exceeds 1, which is a positive indicator.- However, from 2022 onwards, the coverage ratio shows a concerning trend falling well below 1, hence implying that the company is paying out more in dividends than it earns in profits in these years.Dividend sustainability is crucial here. Prolonged periods where dividends are not covered by earnings can lead to cuts in future dividend payments or even financial instability.

Dividends Well Covered by Cash Flow?

A metric assessing whether a company's dividends are covered by its free cash flow. Ideally, free cash flow should well exceed dividend payouts to ensure sustainability.

The free cashflow coverage of dividends for Bechtle shows significant variability over the years. Starting from a low 0.22 coverage ratio in 2003, it displays periods of zero coverage in the mid-2000s, corresponded by instances where dividends were either not paid or marginal. A peak in adequate coverage is seen in years like 2021 with 1.98, and when the metric falls significantly to -2.44 in 2017. Such fluctuations might indicate concerns about Bechtle's consistency in ensuring that dividends are well-supported by free cash flow, suggesting potential risks in dividend reliability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate a reliable income stream for investors and demonstrate the company's ability to generate consistent earnings. This is especially important for income-seeking investors who depend on dividend payments for their income.

An analysis of Bechtle's (BC8.DE) dividend payments over the past 20 years shows a general upward trend with few inconsistencies. While there were fluctuations, notably in 2015 and 2020, these did not result in a more than 20% drop from previous years, indicating a degree of stability. Notably, in 2015, the dividend dropped to 0.6 from 1 in 2014, and in 2020, it increased to 1.2 in a pandemic-stricken year, followed by a dip to 0.55 in 2022. Despite this reduction, no overall 20% drop occurred, showing resilience even in challenging periods. Therefore, Bechtle demonstrates a fairly stable dividend policy, generally aligning with the expectations of income-seeking investors.

Dividends Paid for Over 25 Years?

The criterion examines whether a company has paid dividends consistently for over 25 years. A steady dividend payment record is a sign of financial stability and can indicate a company's growth potential.

The dividend data for Bechtle (BC8.DE) spans 23 years, from 2001 to 2023. The company has consistently paid dividends every year within this period. Although Bechtle hasn't hit the 25-year mark yet, it has shown a commitment to returning value to its shareholders over nearly a quarter of a century. This long history is promising and suggests that the company values financial stability and shareholder returns. Dividends per share have generally increased over time, from €0.25 in 2001 to €0.65 in 2023, showing a healthy trend in payouts. However, the dividend dropped to €0.55 in 2022, slightly breaking the pattern of consistent growth. Overall, the 23-year dividend history is quite good, but investors should monitor for any further declines or stagnation.

Reliable Stock Repurchases Over the Past 20 Years?

A consistent stock repurchase program indicates the company’s confidence in its own financial health and prospects, and can benefit shareholders by boosting EPS and providing price support. Evaluating stock repurchases over the past 20 years helps assess the sustainability of this practice.

Analyzing the given data for Bechtle (BC8.DE) over the past 20 years shows that the only notable repurchase year is 2009 when shares outstanding decreased from 127.2 million to 125.1 million. This action suggests some level of confidence or strategic financial decision during an economically turbulent period (notably the global financial crisis). However, since it's the only recorded repurchase year, the average rate of repurchase is 0.245%, which is marginal and insignificant. This lack of consistent repurchases could be interpreted as the company either not prioritizing stock repurchases or employing other financial strategies to return value to shareholders, such as dividends or reinvestments in growth. Overall, for those seeking companies with reliable stock repurchase programs, Bechtle may not meet the criterion positively as it shows inconsistent engagement in such activities.