Last update on 2024-06-28

Ball (BLL) - Dividend Analysis (Final Score: 6/8)

Discover Ball Corporation's (BLL) dividend stability and performance. An 8-criteria scoring reveals insights vital for income-focused investors. Final Score: 6/8.

Short Analysis - Dividend Score: 6

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

Ball Corporation (BLL) scored 6 on the 8-criteria dividend analysis system. The assessment evaluated various factors, from dividend yield to stock repurchases, signaling performance and dividend stability. BLL's dividend yield, currently at 0.2856%, is considerably lower than the industry average of 2.13%, which may be a concern for income-focused investors. Its average annual growth rate has been erratic due to inconsistencies in dividend payments, making it challenging to maintain a steady 5% growth rate. However, the payout ratio has been consistently low, averaging 19.28% over 20 years, indicating prudent financial management. Earnings and cash flow coverage of dividends have shown stability but highlighted fluctuations in recent years. While dividends have generally increased over the past two decades, a significant drop occurred in 2022. BLL also has an impressive history of dividend payments for 25 years and a consistent stock repurchasing policy, which are positive signs of financial health and commitment to shareholders.

Insights for Value Investors Seeking Stable Income

Based on the given analysis, Ball (BLL) shows both strengths and areas of concern. The low dividend yield and recent drop are red flags for income-seeking investors, while the company's historical performance, low payout ratio, and consistent stock repurchases indicate a potentially stable and growing investment in the long term. Thus, BLL might be more suitable for investors prioritizing long-term growth and financial stability over immediate high income. However, potential investors should keep a close eye on recent fluctuations in dividend payments and free cash flow coverage to better understand BLL's short-term financial health.

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?

explain the criterion for Ball (BLL) and why it is important to consider

Dividend yield is a financial ratio indicating how much a company pays out in dividends each year relative to its stock price. An investor may prefer companies with higher yields as it may imply a steady income. Historically, Ball Corporation's (BLL) dividend yield has seen fluctuations but has usually hovered around the 0.7-1% mark. Recent years denote a downward trend, reaching 0.2856% in 2022, starkly lower than its historical average and the industry average of 2.13%. Such a low yield could signal potential red flags for income-focused investors, as a yield much lower than the industry average could indicate either a high stock price or lower dividends.

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

Explain the criterion for Ball (BLL) and why it is important to consider

The dividend growth rate is a critical measure of the company's ability to increase payouts to shareholders over time, reflecting its resilience and profitability. For Ball, the performance history based on Dividend Ratio for the past 20 years presents a fluctuating trend in dividend per share. Despite intermittent omission of dividends in several years, the company's resilience is apparent with spikes indicating recovery periods. However, calculating an annualized growth rate exceeding 5% becomes complex given many zero dividend years. Given the average dividend ratio of 13.5%, the company possibly has more consistent payouts lately. With significant deviations like -71.4286 in 2022, Ball's homogenous growth at 5% annually is questionable but reflects periods of prudent financial management amidst macroeconomic challenges.

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 the form of dividends. A payout ratio lower than 65% suggests the company is retaining a healthy portion of earnings for growth, operations, or debt repayment.

Over the last 20 years, Ball Corporation's average payout ratio of 19.28% is comfortably lower than the 65% threshold. This indicates prudent financial management, as a low payout ratio allows more earnings to be reinvested back into the company. It also acts as a cushion against unforeseen financial difficulties or economic downturns. The consistently low payout ratio, staying well below 65% every single year, underscores Ball's conservative dividend policy, which appears sustainable and portrays potential for future growth. This is a good trend for long-term investors seeking stability and growth.

Dividends Well Covered by Earnings?

The payout ratio, which is the percentage of earnings paid to shareholders in dividends, should ideally be low enough to ensure that the company can sustain its dividends even if earnings fluctuate. This is essential for investors seeking stable and reliable income.

Looking at the historical data, Ball's earnings per share (EPS) have generally increased over the years, demonstrating consistent growth. From 2003 to 2022, EPS rose from $0.503 to $2.2468. During the same period, dividends per share also increased, albeit at a slower rate. In 2022, the dividend per share actually dropped to $0.2, significantly lower than in 2021. When calculating the dividend coverage ratio (dividends paid out of earnings), the results range from a low of 7.84% in 2010 to a high of 34.84% in 2017. Most years show a strong dividend coverage, often below 20%. This indicates that Ball has generally had no issues covering its dividends with its earnings, except for some fluctuation in the earlier years and 2022. The substantial drop in dividend coverage in 2022 might be alarming, but given the strong history, this could be a temporary issue. Overall, the low payout ratios seen over most of the analyzed period suggest that the dividends are indeed well-covered by earnings. This is generally a positive trend, reflecting the company's ability to comfortably meet its dividend obligations.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that a company generates enough free cash flow to not only maintain but also grow its dividend payments. This criterion is important as it reflects financial stability and sustainability of dividend payouts, signaling to investors that the company is reliable for income generation.

Analyzing the free cash flow and dividend payout amount for Ball (BLL) over the years, there are noteworthy fluctuations in how well the dividend is covered by cash flow. From 2003 to 2015, Ball maintained a range between 0.1 and 0.2, indicating that the company's dividends were adequately covered, albeit on the lower side. However, the sharp negative turn in 2016, with a value of -0.201, indicates that the company’s free cash flow was insufficient to cover its dividends, hinting at potential cash flow challenges in that year—possibly due to significant investments or operational hurdles. After recovering well in 2017 to 0.139, peaking notably in 2019 at 0.191, and soaring unrealistically high in 2021 due to a very low free cash flow figure, the trend became alarming in 2022 with a drastic drop to -0.186. Such volatility suggests underlying issues with cash flow stability and highlights the need for investors to monitor Ball's financial health closely. Overall, this erratic trend raises concerns about the company’s ability to consistently cover dividends from its free cash flow.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over two decades enhance reliability and predictability, key for income investors.

Over the past 20 years, Ball (BLL) has demonstrated stabilty in terms of its dividend payments. Notably, from 2003 to 2021, the dividends per share consistently increased, showing a strong upward trend. This is beneficial as it typically indicates growing profitability and a commitment to returning value to shareholders. However, 2022 saw a significant drop in the dividend per share to $0.2 from the previous $0.7. This represents a decrease of over 70%, far exceeding the 20% threshold we've set, which can be seen as a negative indicator for dividend stability. This dramatic reduction might indicate underlying financial difficulties or a strategic shift in capital allocation by the company. Regardless, it does raise concerns for income-seeking investors who depend on consistent and reliable dividend income.

Dividends Paid for Over 25 Years?

Examine if Ball has consistently paid dividends for over 25 years. Continuous and growing dividends can signal financial health and stability to investors.

Ball has maintained a consistent dividend payment from 1998 to 2022, a span of 25 years. This consistency is a strong indicator of the company's financial stability and dedication to returning value to shareholders. Notably, the dividend per share has shown an upward trend, from $0.0375 in 1998 to a peak of $0.7 in 2021, before dropping to $0.2 in 2022. Such an upward pattern historically signifies robust financial performance, though the recent drop might warrant further inquiry into the company's short-term financial strategies and market conditions to understand the factors affecting the cut in dividends.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases involve a company buying back its own shares consistently over multiple years, reducing the number of shares outstanding. This is important as it signals management's confidence in the company's future and can enhance shareholder value.

Over the past 20 years, Ball (BLL) consistently repurchased its own shares, with the number of shares reducing from 457,096,000 in 2003 to 320,008,000 in 2022, except for a few years like 2016 where shares increased. The average decrease rate of -1.7234 suggests a general trend of share reduction, although not all years saw repurchases. This repurchase trend, covering 16 out of the 20 years, indicates a positive shareholder-focused approach, enhancing value for long-term investors due to potential EPS and share price improvements.