Last update on 2024-06-27

Bristol-Myers Squibb (BMY) - Dividend Analysis (Final Score: 5/8)

Comprehensive dividend analysis of Bristol-Myers Squibb (BMY) using an 8-criteria scoring system. Final score: 5/8, assessing dividend performance and stability.

Short Analysis - Dividend Score: 5

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

The dividend analysis of Bristol-Myers Squibb (BMY) reveals mixed results: 1. **High Dividend Yield**: The current yield is significantly above the industry average at 4.4436%. 2. **Dividend Growth Rate**: Average annual growth rate is 5.43%, slightly above the benchmark, but with noticeable volatility. 3. **Payout Ratio**: The average payout ratio is higher than the preferred 65%, at 81.75%, raising concerns about sustainability. 4. **Coverage by Earnings**: Generally well-covered in the majority of years, but some years show concerning coverage shortfalls. 5. **Coverage by Cash Flow**: Declining trend observed post-2011 with recent low coverage ratios. 6. **Stable Dividends**: Despite some variation, dividends have been relatively stable and have not exceeded a 20% decline in any single year. 7. **Long-Term Payer**: The company has consistently paid dividends for over 25 years, indicating strength and commitment to shareholders. 8. **Stock Repurchases**: Some inconsistencies, but multiple instances indicate shareholder value enhancement efforts.

Insights for Value Investors Seeking Stable Income

Investors seeking stable income might appreciate the high dividend yield and the company's consistent history of over 25 years of dividend payments. However, the high payout ratio and unstable year-on-year growth rates could be red flags. Additionally, fluctuating cash flow coverage and some years of inadequate earnings coverage might pose sustainability issues for future dividends. Considering these factors, BMY may be worth exploring further for income-focused investors, but caution is advised, especially regarding sustainability concerns.

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

Bristol-Myers Squibb (BMY) currently has a dividend yield of 4.4436%, which is markedly higher than the industry average of 3.29%. Over the last 20 years, BMY's dividend yield has fluctuated significantly, ranging from a low of about 1.95% in 2016 to a high of roughly 6.67% in 2008. In contrast, the industry average has shown extreme volatility, especially around 2019-2020, with figures as high as 162.86%. The high current yield is a positive indicator, suggesting that BMY is providing an attractive return to its shareholders compared to other companies in the industry. Despite fluctuations in stock price, closing between $22.98 and $71.95, the company has managed to maintain a relatively stable dividend per share, which recently stands at about $2.28. Overall, the higher-than-average dividend yield of BMY is a favorable sign for income-focused investors.

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

The Dividend Growth Rate signifies the annual percentage growth rate of a company's dividend distribution. An annual growth rate higher than 5% indicates a healthy and increasing return to shareholders over time.

The average Dividend Growth Rate for Bristol-Myers Squibb (BMY) over the past 20 years is approximately 5.43%. While this average figure is slightly above the 5% threshold, it's important to note that the individual year-on-year growth rates have exhibited significant volatility. Out of 21 years, there are multiple instances of both positive and negative growth rates, some years showing declines as high as -35.8079% in 2021, and others showing substantial increases up to 46.9388% in 2023. This inconsistency indicates that while the company has managed to average above the 5% mark, its dividend growth is not stable. Investors might find this erratic pattern concerning if they are seeking steady income from dividend distributions. Essentially, although the trend meets the criterion, the underlying volatility may not promise stable dividend returns year-over-year.

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

Average Payout Ratio lower than 65% in the last 20 years refers to the portion of earnings paid to shareholders in dividends. A healthy dividend payout ratio is typically below 65%, ensuring that the company retains enough earnings for growth and operations.

The average payout ratio for Bristol-Myers Squibb (BMY) over the last 20 years is approximately 81.75%, which is significantly higher than the recommended threshold of 65%. This higher average payout ratio suggests that BMY has been distributing a substantial portion of its earnings as dividends. While this could be attractive to income-focused investors, it could also imply that the company has less retained earnings to reinvest in business growth and operations. Specific years, such as 2006, 2012, and 2015, show payout ratios well above 100%, indicating dividends exceeded net income, potentially raising questions about the sustainability of such dividends without dipping into reserves. On the positive side, in years like 2009, 2013, and 2016, the payout ratio was below 65%, reflecting a more balanced approach. Overall, the trend suggests a need to closely monitor future payout ratios and earnings to ensure the sustainability of its dividend policy.

Dividends Well Covered by Earnings?

Dividend coverage ratio is critical for assessing if the company's earnings sufficiently support its dividend payouts. A ratio above 1 indicates earnings are covering dividends, enhancing financial stability.

Examining Bristol-Myers Squibb's history of dividend coverage, the dividend per share was well-covered by earnings per share for the majority of the years, particularly in 2003, 2013, and 2017, with ratios substantially above 1. Conversely, years like 2009, 2010, and the troubling -0.57 ratio in 2020 indicate years where dividends exceeded net earnings, posing sustainability concerns. Nonetheless, a positive shift is evident in 2021 and 2022, with ratios recovering to 0.72 and 0.59 respectively. Generally volatile, the overall health of dividend coverage shows inherent risks, particularly under income pressures, warranting investor caution.

Dividends Well Covered by Cash Flow?

Dividends covered by cash flow indicates the ability of a company to cover its dividend payments with the cash flow it generates from operations. It reflects the financial health and sustainability of the dividend policy.

In analyzing Bristol-Myers Squibb's free cash flow in relation to its dividend payouts, it is evident that the coverage has fluctuated significantly over the past two decades. The ratios began relatively healthy in the early 2000s, with a value close to or just below 1, indicating that the company was generating almost enough free cash flow to cover its dividend payments. However, in 2005 and 2006, we see an anomaly where the ratio exceeded 1, suggesting that the company's free cash flow at those times significantly surpassed the dividend payout, which is a good sign. Unfortunately, from 2011 onwards, there has been a general decline in the coverage ratio, with values sinking below 0.5 post-2011 and reaching as low as 0.28 in recent years as of 2021. Despite a considerable increase in free cash flow from 2018 to 2021, the dividend payout also rose, though not proportionally, leading to lower coverage ratios. This trend shows growing fiscal pressures and may be concerning to investors relying on the company's dividends as a steady income source. Therefore, from a long-term perspective, the observed trend is unfavorable, raising questions about the sustainability of Bristol-Myers Squibb's future dividend payments under similar cash flow conditions.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate financial robustness of a company, fostering trust among income-seeking investors.

Bristol-Myers Squibb's dividend payments over the past 20 years have shown some variability, with dividends per share fluctuating between $0.84 and $2.29. Notably, there were drops in certain years, such as from $1.12 in 2003 to $0.84 in 2004, and from $1.76 in 2013 to $1.45 in 2014. However, none of these declines exceeded 20% over a single year, indicating a relatively stable dividend trend. This consistency is supportive for income-focused investors as it reflects a degree of stability and reliability in revenue distribution.

Dividends Paid for Over 25 Years?

Assessing whether a company has consistently paid dividends for over 25 years is crucial. It reflects the company's stability, profitability, and its commitment to returning value to shareholders.

Analyzing the provided dividend data of Bristol-Myers Squibb (BMY) from 1998 to 2023, it is evident that the company has consistently paid dividends over 25 years. This sustained dividend history suggests financial stability and a consistent profit generation capability. Over the 25 years, BMY's dividend payments show periods of increases which is a positive indicator. For instance, from 2021 to 2023, there is a growth from $1.47 to $2.28. However, it is essential to note the fluctuations in some years, such as the decline between 2002 and 2004. These variations, while minor, could imply response strategies to internal or external financial pressures. Overall, the trend is good, indicating a reliable history of dividend payments to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluating whether a company has reliable stock repurchases is essential as it reveals management's commitment to returning value to shareholders, typically reflecting financial health and strategic focus.

Bristol-Myers Squibb (BMY) has displayed a pattern of stock repurchasing that is not overly consistent but evident in multiple years. Notable repurchase activities took place in 2006, 2009, 2010, 2011, 2012, 2013, 2017, 2018, 2021, 2022, and 2023. During these periods, the number of shares decreased, indicating buyback initiatives. The average repurchase rate over the last 20 years is approximately 0.5735, meaning on average there is slight reduction in shares each year. This activity can be seen positively as it suggests management's efforts to enhance shareholder value through buybacks. However, the spike in shares in 2020 to 2.258 billion from 2019's steady numbers could hint at a strategic issuance possibly for an acquisition or capital raising, which also needs to be taken into consideration.