Last update on 2024-06-27

Bunge (BG) - Dividend Analysis (Final Score: 5/8)

Bunge (BG)'s dividend policy scored 5/8 in our thorough 8-criteria analysis, highlighting the company's performance and stability.

Short Analysis - Dividend Score: 5

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

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 represents the ratio of annual dividend payments to the stock's current market price. It is an important metric for income-focused investors because it quantifies the cash return they receive from holding a dividend-paying stock.

Bunge's current dividend yield of 2.5518% is notably lower than the industry average of 4.37%. Over the past two decades, Bunge's dividend yield has fluctuated, reaching its highest point at 3.5928% in 2018 and its lowest at 0.567% in 2007. Comparing this to the industry averages over the same period which have ranged from as high as 27.98% in 2010 to as low as 0.52% in 2007, it indicates that while Bunge offers a steady yield, it generally underperforms the broader industry. This trend might be viewed negatively for income-focused investors who may seek higher yields, suggesting that Bunge could be less attractive in terms of purely dividend returns. However, considering the company's consistent growth in dividend per share from $0.42 in 2003 to $2.576 in 2023, it shows commitment to shareholder returns. Furthermore, Bunge's relatively stable stock price could indicate potential for lower volatility, making it a more stable but less aggressive dividend option.

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

The Dividend Growth Rate over a long period, such as 20 years, allows investors to see how steadily a company's dividends have increased. An annual growth rate of over 5% indicates robust growth and sustainability in dividend payments. It assures investors of the company's consistent profitability and sound financial health.

When analyzing Bunge's dividend growth rate over the last 20 years, it can be seen that the dividend per share ratio fluctuates, indicating volatile dividend growth. The average dividend ratio stands at approximately 9.54%, which is higher than the 5% benchmark. However, the growth trend is not consistently stable, as evidenced by certain years where the ratio drops significantly, such as from 2019 to 2020 when it plunged to 0%. Despite some years of strong increases, the inconsistency and volatility in the dividend growth rate might raise concerns about the sustainability of these growth rates. Therefore, while the dividend growth rate is overall higher than 5%, the trend is indicative of potential volatility in earnings and dividends, which is not ideal for risk-averse investors.

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

Payout Ratio is the proportion of earnings paid out as dividends to shareholders, and an average below 65% over 20 years indicates sustainability.

For Bunge (BG), the Payout Ratio over the last 20 years averages to approximately 39.09%, which is well below the 65% threshold. This indicates a conservative dividend policy prioritizing long-term sustainability and reinvestment into the business. With a significant portion of earnings retained, Bunge potentially ensures better financial flexibility. However, in 2012 and 2017, the payout ratios significantly exceeded 100%, indicating years of poor earnings relative to dividends paid wherein Bunge may have returned more capital to shareholders than earned. Despite these spikes, the overall trend being under 65% generally indicates a dividend that is sustainable long-term.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings ensures that the company sustainably rewards shareholders without jeopardizing financial stability.

Analyzing the period from 2003 to 2023, Bunge's Earnings per Share (EPS) and Dividend per Share (DPS) reveal that dividends are mostly well-covered by earnings. Ratios significantly below 1 indicate the EPS sufficiently covers the dividends, with exceptions in 2009, 2012, 2017, and 2019 where earnings were insufficient to cover the dividends. The trend shows overall good coverage, especially noted in strong EPS years like 2021 and 2008. Despite some years with low coverage, the overall long-term trend is positive, reflecting financial prudence in majority years. This bodes well for Bunge's dividend sustainability.

Dividends Well Covered by Cash Flow?

Free cash flow indicates the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. The ratio of free cash flow to dividend payout helps determine if dividends are sustainably covered.

Bunge's Free Cash Flow (FCF) has exhibited substantial volatility over the years, with notable instances of negative FCF, such as in 2022 with -$6.104 billion, versus positive spikes including $218.6 million in 2023. The relationship between FCF and dividend payout, as seen from the 'Dividend covered by Cashflow' metric, reinforces that the company's ability to cover dividends via its cash flow is inconsistent. For instance, significant negative coverage ratios such as -6.18 in 2015 and -0.85 in 2005 highlight years of cash flow stress, suggesting dividends might have been funded through other means rather than FCF. Conversely, more favorable ratios like 0.39 in 2014 and 0.82 in 2017 indicate a stronger, albeit occasional, alignment of dividends with available cash flow. Despite FCF covering dividends well in 2023 (0.18), the historical inconsistency, seen with frequent negative ratios, flags potential sustainability issues in certain periods. Hence, although recent trends are encouraging, the long-term pattern hints at periods of cautiousness due to the reoccurring volatility in FCF.

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.

Analyzing Bunge's (BG) dividend payment history over the past 20 years, the trend is generally positive, demonstrating a consistent increase from $0.42 per share in 2003 to $2.576 per share in 2023. This growth signifies financial stability and a commitment to rewarding shareholders. However, it is critical to point out that there was a single instance within this period where the dividend dropped by 20%, which can be a red flag for some risk-averse investors. Despite this, the overall upward trajectory outweighs this anomaly, making this trend slightly favorable but with a note of caution for highly conservative income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years? This criterion examines whether a company has consistently paid dividends for a significant period, in this case, 25 years. It indicates financial stability and reliability, showcasing a long-term commitment to returning value to shareholders. Companies that meet this criterion are often perceived as less risky and more stable investments.

Based on the provided data, Bunge (BG) has paid dividends consistently from 2001 through 2023, with a noticeable absence in 1999 and 2000. The company's dividend per share (DPS) has shown a consistent upward trend from $0.095 in 2001 to $2.576 in 2023, which is a positive sign for investors seeking steady income. However, since the consistency starts in 2001 and not 1999, Bunge does not fully meet the 25-year criterion but demonstrates strong performance in the last 22 years. This substantial and consistent growth in dividends can be viewed positively, indicating Bunge's strong financial health and commitment to rewarding its shareholders over the long term.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that a company is effectively using its excess capital to buy back shares, increasing the value for remaining shareholders.

Over the past 20 years, Bunge (BG) has demonstrated a commitment to stock repurchases in 8 of those years (2009, 2011, 2012, 2014, 2016, 2017, 2019, 2020). The number of shares fluctuated with several notable declines in specific years. Notably, shares outstanding decreased from 137,591,266 in 2008 to 127,669,822 in 2009, indicating a buyback during a financially turbulent time. The reliability of these repurchases improves overall shareholder value by reducing the number of shares available and thereby increasing the earnings per share (EPS). However, it is also essential to consider that the number of shares outstanding has increased in some years, such as from 127,669,822 in 2009 to 156,274,814 in 2010, which could counter some positive effects of buybacks. On average, the firm has conducted share repurchases slightly over 2 years within each 10-year period, which is a modest but positive trend.