Last update on 2024-06-27

Befesa (BFSA.DE) - Dividend Analysis (Final Score: 4/8)

Analyze Befesa (BFSA.DE) dividend policy with our 8-criteria scoring system. Get insights on stability, payout ratio, coverage, and growth.

Short Analysis - Dividend Score: 4

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

We evaluated Befesa (BFSA.DE) using an 8-criteria system for its dividend policy: 1. **Dividend Yield:** Befesa has a 3.5511% yield, higher than the industry average of 1.76%, making it attractive for immediate income. 2. **Dividend Growth Rate:** Lacks consistent data over 20 years, with payouts starting in 2019. Significant fluctuations indicate no steady growth. 3. **Payout Ratio:** Average of 17.95%, well below the 65% benchmark, suggesting a conservative and sustainable policy. 4. **Earnings Coverage:** Mixed trends; recent years show reasonable but declining coverage, and 2023 shows potential instability. 5. **Cash Flow Coverage:** Not directly mentioned, but is inherently important for dividend sustainability. 6. **Stable Dividends History:** Initial drop in 2020, post-COVID recovery, and recent stability suggest improving reliability since 2019. 7. **25-Year History:** Insufficient with dividends only since 2019. 8. **Stock Repurchases:** Inconsistent with significant repurchase only in 2017, lacking reliability. Overall, Befesa shows promise, particularly in recent years, but lacks long-term data and stability in some areas.

Insights for Value Investors Seeking Stable Income

For potential investors, Befesa (BFSA.DE) can be appealing due to its high dividend yield and conservative payout ratio. However, its short history of paying dividends, inconsistent growth and coverage, and unreliable stock repurchase programs suggest caution. Investors looking for long-term stability might find other stocks more suitable, but for those focused on recent performance, Befesa shows potential for good returns if the positive trends continue.

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 measures the cash flow received by an investor (dividends) for each dollar invested in a company's stock. It is expressed as a percentage. Higher dividend yields are generally attractive to income-seeking investors as they indicate more cash flow per dollar invested.

Befesa's current dividend yield of 3.5511% is significantly higher than the industry average of 1.76%. Over the last decade, Befesa's dividend yield has shown a positive upward trend, starting from 3.4737% in 2019 to its current value. This indicates an increasing return of cash to shareholders relative to its stock price. In 2023, with a dividend per share of 1.25 EUR and a closing stock price of 35.2 EUR, the dividend yield calculates to 3.5511%, demonstrating that the company has been consistently returning cash to its investors. Compared to the industry average, which peaked at 2.19% in 2022 and generally stayed around 1.76%, Befesa's higher dividend yield translates to higher immediate income returns to investors. However, potential investors should also consider the company's long-term sustainability and ability to maintain or grow its dividends. The upward trend and significant margin above the industry average indicate a positive scenario for investors, suggesting that Befesa is likely well-managed in terms of its profit distribution strategy.

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

Consider if the Dividend Growth Rate is higher than 5% in the last 20 years and why it's important.

Given the dividend payments from 2013 to 2023, Befesa does not provide consistent dividend history data over the last 20 years. Dividend payouts started appearing in 2020 with a drastic negative payout followed by significant positive payouts in 2021 and 2022, which do not demonstrate a steady growth. The Calculation cannot support a 20 years span. This inconsistency paired with the average dividend payout indicates that its growth rate cannot be determined to be consistently over 5%, suggesting a non-reliable trend for long-term investors.

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

The payout ratio indicates the percentage of earnings distributed to shareholders as dividends. A lower ratio is typically more sustainable.

Befesa's average payout ratio over the given years is 17.95%, which is significantly lower than the 65% benchmark. This low payout ratio suggests a conservative and sustainable dividend policy over the observed period. This trend is favorable as it indicates the company retains a substantial portion of earnings to reinvest in growth or cover unforeseen expenses. The payout ratio only surged above zero in 2019, 2020, 2021, and 2022, supporting that the company may have been focusing on reinvestment or financial stability prior to that.

Dividends Well Covered by Earnings?

The criterion evaluates whether the company's earnings are sufficient to cover its dividend payments. This is important for understanding the sustainability of the dividends.

Befesa's historical data on earnings per share (EPS) and dividends per share (DPS) reveals a mixed trend regarding dividend coverage. The company's EPS fluctuated significantly from -0.2687 in 2013 to 2.6555 in 2022, showing periods of both loss and profit. Notably, during 2013 to 2018, no dividends were paid, hence DPS was 0. Starting from 2019, dividends were distributed with a DPS of 1.32 and covered by EPS of 2.428, giving a coverage ratio of approximately 0.54. This ratio indicates a reasonable coverage with room for improvement. The downward trend in coverage ratio from 2019 to 2022 is alarming, reducing to 0.47 in 2022. In 2023, both EPS and DPS dropped to 0 and 1.25 respectively, indicating unsustainable dividends without earnings coverage. This trend signals potential financial instability in dividend payouts, which might concern long-term investors.

Dividends Well Covered by Cash Flow?

Why is it important for dividends to be well covered by free cash flow?

Dividends being well covered by cash flow means that the company is generating enough cash from its operations to pay dividends to shareholders without needing to resort to external financing or reducing its cash reserves. This metric is important because it reflects the company's ability to sustain its dividend payouts and is a strong indicator of financial health and operational efficiency.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over 20 years mean consistency in dividend payouts with minimal drops, important for reliable income.

Analyzing Befesa's dividend per share data from 2013 to 2023 indicates that the company began issuing dividends in 2019 with a €1.32 per share payout. Subsequently, there was a significant drop to €0.73 in 2020, representing a decline of approximately 44.7%. However, from 2020 onwards, dividends increased again to €1.17 in 2021 and stabilized at €1.25 from 2022 onwards. This trend demonstrates that while there was an initial drop in dividends when the company started paying out, it has shown recovery and stability in its payout in recent years. Despite the 2020 drop, it's worth noting the context of the COVID-19 pandemic, which led many companies to cut or suspend dividends. Since then, Befesa has displayed commendable stability, making it relatively good for income-seeking investors, especially if post-2020 trends continue.

Dividends Paid for Over 25 Years?

The historical continuity of dividend payments over a period of more than 25 years demonstrates a company's financial stability and reliability. It's a strong indicator for long-term investor confidence.

Reviewing the dividend data for Befesa (BFSA.DE) across the past 11 years reveals a pattern of payments only starting from 2019. With dividend per share values of 1.32 in 2019, 0.73 in 2020, 1.17 in 2021, 1.25 in 2022 and 1.25 in 2023, the trend is over a relatively short timeframe. This does not satisfy the criterion of consistency in dividend payments over a 25-year period. Although the upward trajectory since 2019 reveals a promising potential for future reliability in dividend payments, Befesa (BFSA.DE) has not yet established the long-term continuity necessary to provide strong assurance of dividend stability according to this particular criterion. This could be viewed as a negative aspect for investors seeking long-term consistency in dividends.

Reliable Stock Repurchases Over the Past 20 Years?

Criterion for reliable stock repurchases over the past 20 years and why it is important to consider.

An analysis of the stock repurchases by Befesa in the last 20 years reveals noteworthy trends. The initial years from 2013 to 2016 show a consistent number of shares at 34,066,705. However, in 2017, shares dropped significantly to 25,025,000, which indicates a substantial stock repurchase. Post-2017, the number of shares increased again, growing to 40,000,000 by 2021 and maintaining this count till 2023. Reliable stock repurchases act as a signal of management’s confidence in the company’s valuation. In this case, with only one significant repurchase year (2017) and an average of 2.6319 over 20 years, the company's stock repurchase program does not seem very consistent or reliable. This inconsistency can be seen as a red flag for potential investors looking for a stable repurchase pattern as a sign of financial robustness.