Last update on 2024-06-27

Bayerische Motoren Werke (BMW.DE) - Dividend Analysis (Final Score: 7/8)

Bayerische Motoren Werke (BMW.DE) - Comprehensive dividend analysis with a 7/8 score, evaluating performance stability across multiple financial criteria.

Short Analysis - Dividend Score: 7

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

BMW has a dividend score of 7 based on an 8-criteria assessment. Here's a breakdown: 1. Dividend yield stands at 8.4342%, much higher than the industry average of 2.91%. 2. The 20-year average dividend growth rate is 25.06%, surpassing the 5% target. 3. The average payout ratio over 20 years is 62.62%, which is under the 65% threshold. 4. Dividend coverage by earnings varies, highlighting high volatility especially during downturns like the 2008 financial crisis. 5. Dividend coverage by cash flow has improved significantly since 2019, making it more stable. 6. BMW has a mostly stable dividend history, with a notable drop in 2009 due to the financial crisis but has since shown strong recovery. 7. The company has been paying dividends for over 25 years, demonstrating long-term commitment. 8. Stock repurchase practices are significant but inconsistent over the past 20 years.

Insights for Value Investors Seeking Stable Income

Based on this analysis, while BMW shows high dividend yield and growth, consistent dividend payouts, and improving cash flow coverage, the volatility in earnings coverage and inconsistent stock repurchases could be potential risks. If you are looking for strong income through dividends and believe BMW can maintain its recovery from economic downturns, it could be a worthwhile investment. However, consider the earnings' volatility and historical economic sensitivity before making a 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 represents the dividend income per share as a percentage of the share price.

BMW's dividend yield of 8.4342% is significantly higher than the industry average of 2.91%, indicating that BMW provides a higher return on investment through dividends. This could be an attractive aspect for income-seeking investors. Historically, BMW's dividend yield has fluctuated, with a significant peak in 2008 (14.1601%) during the financial crisis, and a low in 2010 (0.5098%). This high recent yield may suggest a strong financial position or it could be a result of a recent decline in share price. For perspective, BMW's share price has grown from €36.75 in 2003 to €100.78 in 2023, while the dividend per share has also increased from €1.58 to €8.5, illustrating the company's capacity to return value to shareholders through dividends and growth.

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

The criterion refers to the annual compound dividend growth rate over a period of 20 years. This measurement helps investors understand how quickly the company is increasing dividends, reflecting its ability to generate earnings growth and return profits to shareholders over a long period.

Examining BMW's dividend growth rate over the last 20 years reveals an average dividend growth ratio of 25.06%, which is significantly higher than the target rate of 5%. The dividend per share ratio has shown substantial increases in certain years, particularly in 2011 (333.33%) and 2008 (40.37%), demonstrating a strong upward trajectory. Nevertheless, there are negative values in some of the years, including 2009 (-90.20%) and 2020 (-28.57%), indicating challenges during economic downturns. Despite some volatility, the overall high average growth rate is a positive indicator, reflecting BMW's strong profitability and capacity to reward shareholders consistently over the long term.

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

The average payout ratio measures the proportion of earnings a company pays to its shareholders in the form of dividends.

Analyzing the payout ratio of BMW.DE over the past 20 years reveals an average of 62.62%. Given that a prudent company's dividend sustainability is considered safe when the payout ratio is below 65%, BMW's 20-year average payout ratio falls within a favorable range. This indicates that the company maintains a balanced approach by retaining a sufficient portion of earnings for reinvestment, while still rewarding its shareholders. However, it's crucial to note the large spike to 605.82% in 2008, likely due to a significant drop in earnings that year, which skews the average. Most of the other years consistently fall well below the 65% threshold. Overall, this trend is relatively good for dividend sustainability, barring extraordinary circumstances like 2008.

Dividends Well Covered by Earnings?

Dividends well covered by earnings implies that a company generates enough after-tax profit to pay its dividends comfortably. This reflects positively on the company’s financial health and its capability to uphold or increase its future dividend payouts.

Over BMW.DE's historical timeline from 2003 to 2023, the coverage ratio has seen significant fluctuations. For instance, during the financial crisis in 2008-2009, the coverage was exceptionally high owing to sharply lower earnings, contrasted with high constant dividends. However, post-crisis recovery saw better coverage indicators, such as in 2010 where EPS covered dividends by over 4-fold. Despite an improved EPS trajectory in the following years, the ratio has depicted inconsistency. Coverage was optimal when EPS growth matched or outpaced dividend increases, seen again in 2021, and the extreme spike in recent years calls for a detailed examination of extraordinary one-off items impacting earnings. Especially, the ratios tending significantly above the 1 mark, such as 20.5683 EPS in 2021 compared to 3.8 dividend, are inexplicable without context. Thus, overall, the trend is neither definitively positive nor negative but highlights caution towards earnings volatility and relatively conservative dividend policies.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the free cash flow after operational expenses is sufficient to fund the dividends being paid to shareholders. This criterion is crucial as it reflects the company's ability to sustain its dividend payouts without resorting to excessive borrowing or depleting reserves, ensuring long-term shareholder value and financial stability.

BMW's free cash flow oscillated greatly from negative values in the earlier years, significant positive values in recent years. The critical data here is the percentage of dividends covered by cash flow, which was negative for most of the time till 2018, indicating that free cashflow was insufficient to cover the cash dividends from 2003 to 2018. In favorable terms, from 2019 onward, BMW has shown better prospects with positive coverage ratios like 0.24 and beyond, peaking at 0.82 in 2023. This trend is good for investors, demonstrating BMW's improved operational efficiency and cashflow management, making its dividends more secure.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are a key criterion for evaluating a company because they indicate that the company has consistently generated enough profits to distribute to shareholders, even through economic downturns and other challenges. Income-focused investors rely on this consistency as a predictable source of income.

Looking at BMW's dividend payments over the past 20 years, it's evident that the company has maintained a relatively stable dividend policy with the exception of 2009 where the dividend saw a significant decline to €0.30 from €3.06 in the previous year. This drop corresponds to the global financial crisis, reflecting the automobile industry's vulnerability during economic downturns. Interestingly, post-2009, BMW has shown resilience, with dividends increasing almost steadily year by year, reaching a high of €8.5 in 2023. This strong recovery and long-term upward trend are positive signs, suggesting that the 2009 drop was an anomaly rather than a sign of poor financial health. Therefore, despite the significant dip in 2009, BMW's ability to rebound and grow its dividends reflects financial stability and robust profitability over time. Income seekers would find BMW to have mostly resilient dividends, except for extreme circumstances like the 2009 financial crisis.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is a measure of a company's ability to generate consistent cash flow and maintain financial stability. It signals a company's long-term commitment to returning value to shareholders.

Bayerische Motoren Werke (BMW.DE) has paid dividends consistently for over 25 years, with minor fluctuations in amounts. Such a trend showcases BMW's robust financial stability and commitment to returning value to shareholders. For instance, the dividend per share has grown from 1.097 in 1999 to 8.5 in 2023. These rising figures indicate a strong financial performance and healthy cash flow, which is a positive indicator for current and potential investors.

Reliable Stock Repurchases Over the Past 20 Years?

The reliability of stock repurchases over a significant period is crucial for indicating a company's financial health and its management’s commitment to returning value to shareholders. Regular buybacks can boost earnings per share (EPS) and are a signal of confidence from the management in the company's future.

Examining BMW.DE's number of shares over the past 20 years reveals occasional stock repurchases. Significant repurchases were observed during 2005-2008, 2021, 2022, and 2023, with a considerable reduction in shares from 660+ million to effectively zero by 2023. However, the repurchase activity hasn't been consistent yearly, as evidenced by the occasional increases or stable figures in other years. Averaging a repurchase rate of -5.5735% is notable but suggests a lack of regularity. Hence, while the strategic buybacks in select periods indicate positive financial maneuvering, the inconsistency could imply a lack of a fixed shareholder value return policy. The verdict for this trend is mixed, showing both strengths in sporadic value returns but a weakness in recurrent patterns.