Last update on 2024-06-27

Brenntag (BNR.DE) - Dividend Analysis (Final Score: 5/8)

Analyzing Brenntag (BNR.DE)'s dividend performance. This review assesses Brenntag's dividends based on an 8-criteria scoring system, final score: 5/8.

Short Analysis - Dividend Score: 5

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

The analysis evaluates Brenntag (BNR.DE) based on an 8-criteria scoring system to assess its dividend policy. Brenntag earns a dividend score of 5, indicating moderate performance. It demonstrates strength in a few areas: Its current dividend yield of 2.4033% exceeds the industry average. The annual dividend growth rate has been higher than 5% over the last 20 years at an average of 5.83%. The company maintained a payout ratio of about 47.19%, suggesting a balanced reinvestment strategy. However, Brenntag's dividends are inconsistently covered by free cash flow, with adequate coverage only in recent years (2021 and 2022). The company has shown some volatility in its dividend payments and has only been paying dividends since 2011. It lacks a consistent history of stock repurchases, which can be seen as a drawback for some investors.

Insights for Value Investors Seeking Stable Income

Given Brenntag's mixed dividend performance, it may only be a moderate choice for investors primarily seeking dividend stability. Its positive aspects, such as exceeding the industry’s dividend yield and maintaining a reasonable payout ratio, are offset by inconsistent cash flow coverage and a relatively short dividend payment history. Investors seeking long-term, stable dividends might want to look at companies with a longer track record. However, those willing to tolerate some volatility for potentially higher returns might consider Brenntag a viable option.

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 is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is a sign of financial health and investor returns.

Brenntag's current dividend yield of 2.4033% exceeds the industry average of 2.37%, which shows the company's investment attractiveness. Historically, its yield has fluctuated considerably, peaking in 2012 at 6.035%. Over the last decade, the yields have shown resilience, primarily ranging between 1.6964% and 5.3428%. The slight drop in recent years does suggest pressure, yet maintains parity with industry standards. It's a positive yield trend considering the stock price growth from €25.43 in 2010 to €83.22 in 2023. A consistent dividend per share growth enhances its long-term viability.

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

The Dividend Growth Rate measures the annualized percentage increase in dividend payments over a specified period, highlighting the company's ability to enhance shareholder returns consistently. For Brenntag (BNR.DE), assessing whether the Dividend Growth Rate exceeds 5% over the last 20 years is crucial to gauging the sustainability and attractiveness of its dividend policy.

Brenntag (BNR.DE)'s dividend growth rate data from 2008 to 2023 reveals fluctuating values ranging from substantial increases to notable declines. The highs are evident in specific years like 2012 (42.8571%) and 2023 (37.931%), while there are also significant downturns as seen in 2015 (-65.3846%). Although some individual years have impressive growth rates, the average dividend growth rate of 5.829675% confirms that Brenntag’s dividends have grown at an annualized rate that exceeds the 5% threshold over this period. This trend is generally positive, reflecting Brenntag's capacity to increase shareholder value over time despite a few volatile years. Despite some downward spikes, the long-term growth is beneficial for current and potential investors looking for steady dividend income.

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

Average payout ratio in dividend analysis denotes the average percentage of earnings a company pays to shareholders as dividends. An optimal payout ratio showcases a company's ability to balance reinvestments and returns to shareholders. The general threshold is 65%.

The average payout ratio for Brenntag (BNR.DE) over the past 20 years stands at approximately 47.19%. A payout ratio consistently below 65% indicates that Brenntag prudently manages its earnings, balancing dividends and reinvestments. This approach suggests a deliberate strategy to foster growth while rewarding shareholders. In years like 2011 to 2014, the payout ratio notably exceeded 65%, peaking at 118.39% in 2014, which might indicate exceptional payouts or earnings anomalies. More recently, from 2016 onwards, Brenntag adhered to a more controlled payout strategy, reflecting corporate stability and prudent financial planning. Overall, this trend is favorable, illustrating fiscal responsibility and potential for growth.

Dividends Well Covered by Earnings?

Why dividends being covered by earnings is essential

Examining Brenntag's data, one can see fluctuations in how well its dividends are covered by earnings per share (EPS). Ideally, a company's EPS should comfortably cover its dividend per share (DPS), ensuring sustainable payout practices. The EPS coverage of the dividend enables investors to gauge payout sustainability, avoiding potential traps of over-extending finances for dividend payouts.

Dividends Well Covered by Cash Flow?

The Dividends Well Covered by Cash Flow criterion measures whether a company's free cash flow (FCF) is sufficient to cover its dividend payments. It is calculated by dividing FCF by the total dividend payout. This ratio is important because it shows if a company generates enough cash to support its dividend payments sustainably, without resorting to debt or capital reserves. A ratio above 1 means dividends are well covered, while a ratio below 1 could indicate potential issues.

Looking at Brenntag's data, there are only two years (2021 and 2022) where the ratio exceeds 1, specifically 1.10 and 1.32. For most of the remaining years, this ratio is substantially lower, with several years even dipping below 0.30. This trend is generally negative, indicating inconsistent coverage of dividends by free cash flow. Especially in years like 2008 and 2009, where the ratios are 0.06 and 0.01, respectively, it shows that dividends were poorly covered. However, the recent improvement in 2021 and 2022 may suggest a positive turn, but overall, the inconsistency in coverage remains a concern.

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 important to consider because it indicates the company's commitment to returning value to shareholders consistently and demonstrates financial health and profitability.

The dividend per share of Brenntag (BNR.DE) over the last 20 years shows some volatility. From 2008 to 2010, there were no dividend payments, which can be seen as an indicator of recovery or instability. However, from 2011 onwards, Brenntag started paying dividends with an initial amount of 1.4 EUR per share. The dividends grew steadily until 2015 when there was a significant drop from 2.6 EUR to 0.9 EUR per share, a decrease of approximately 65%, which is far more than the 20% threshold mentioned. While the dividends increased gradually after 2015, only reaching back to the 2 EUR mark by 2023, this downfall in 2015 represents an inconsistency. An analyst might view this long-term trend cautiously, noting the significant decrease in 2015 as a potential risk factor. Nonetheless, Brenntag did show resilience by managing to recover and steadily increase dividends following the drop.

Dividends Paid for Over 25 Years?

length of dividend history

The data indicates that Brenntag (BNR.DE) has been consistently paying dividends since 2011. This amounts to a 13-year dividend payment history. However, it falls short of the 25-year threshold required for Criterion 6. A longer dividend history reflects stability and investor confidence over multiple economic cycles. Therefore, Brenntag does not meet this criterion as the company lacks a long-term track record in paying dividends. Despite recent trends showing consistent or increasing payments (such as the increase from 1.45 to 2 in 2023), the gap in historical continuity could be seen as a disadvantage for very conservative dividend-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Analyzing Brenntag's stock repurchase behavior over the past 20 years, it is apparent that the company has not consistently engaged in stock repurchases. The number of shares generally remained consistent from 2008 through 2022, with a small reduction in 2023. This indicates a single instance of share repurchase in recent years. The limited activity suggests a lack of focus on share buybacks as part of their capital allocation strategy. However, focusing on just one year of buybacks (2023) might imply a new trend or change in policy. Therefore, while the trend is stable, it lacks evidence of consistent repurchases, which is arguably a neutral to negative indication for investors looking for regular buyback-driven value creation.