Last update on 2024-06-27

Danone (BSN.DE) - Dividend Analysis (Final Score: 4/8)

Analyze Danone (BSN.DE)'s dividend performance. Key insights on yield, sustainability, growth rates, and payout ratios for informed investing decisions.

Short Analysis - Dividend Score: 4

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

The dividend analysis evaluates Danone (BSN.DE) based on 8 criteria. The main takeaways are: 1. **Dividend Yield**: Stands at 3.4083%, significantly higher than the industry average of 1.77%. 2. **Dividend Growth Rate**: Average Dividend Ratio slightly above 5%, but highly inconsistent with massive fluctuations. 3. **Payout Ratio**: Average of 53.86%, generally below the 65% threshold, but it occasionally spikes. 4. **Earnings Coverage**: Mixed results, often fluctuant, indicating some stability issues. 5. **Cash Flow Coverage**: Generally below 1, raising concerns about dividend sustainability. 6. **Dividend Stability**: Relatively steady post-2008, slight dip in 2020. 7. **Long-term Payments**: Danone needs to meet the 25-year mark consistently. 8. **Share Repurchases**: Consistent over the last two decades with a moderate repurchase rate.

Insights for Value Investors Seeking Stable Income

Danone shows promising signs with a high dividend yield and a generally responsible payout ratio. However, the inconsistencies in growth and coverage ratios, along with concerns about cash flow sustainability, suggest caution. It may be worth monitoring for those seeking high dividend yields, but be wary of the volatility. A more stable and consistent performer might be a better choice for conservative dividend investors.

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. It is vital for investors to determine the income-generating potential of their investment.

Danone's current dividend yield stands at 3.4083%, significantly higher than the industry average of 1.77%. This difference suggests that Danone is more attractive for income-focused investors. However, it is essential to delve deeper to see the consistency of this yield. In the last 20 years, Danone's dividend yield has generally fluctuated, peaking at 7.7149% in 2020 amid the Covid-19 pandemic and financial anxieties. The company's ability to sustain a higher-than-average dividend yield also indicates its strong financial health and revenue performance over the years. Given its current rate is still comfortably higher than the industry average, this high yield can be seen as a positive indicator for investors seeking reliable passive income. Furthermore, Danone's stock price closed at 58.68 in 2023, supporting a strong payout ratio and consistent dividend strategy, which could attract dividend-seeking investors.

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

The Dividend Growth Rate is the annualized percentage rate of growth that a particular stock's dividend achieves over time. It is important to consider because it indicates the company's ability to consistently increase dividends, reflecting potential financial stability and profitability.

The Dividend Growth Rate for Danone (BSN.DE) over the last 20 years is evaluated with an Average Dividend Ratio of approximately 5.94%. The dividend ratios fluctuate massively, including negative figures such as -53.81% in 2021, offsetting extreme highs such as 116.49% in 2020. Despite some years with no dividend, the overall figure edges past the 5% benchmark, indicating a growth rate slightly above 5%. However, the volatility and inconsistency make this trend worrisome. Therefore, while the trend is technically favorable, the inconsistency may be a red flag for potential investors looking for steady dividend growth.

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

An average payout ratio lower than 65% indicates a company's ability to sustainably return profits to shareholders while retaining enough earnings to fund growth. This ratio balances dividend payments with long-term financial health.

The average payout ratio of Danone (BSN.DE) over the last 20 years stands at approximately 53.86%, which is lower than the 65% threshold. This indicates a disciplined approach to dividend distribution, ensuring that the company retains sufficient earnings for reinvestment and financial stability. However, it's worth noting specific years like 2018, 2020, and 2022, where the payout ratio sharply exceeded 65%, indicating irregularities possibly due to financial stress or extraordinary events. Overall, the trend is positive for the criterion of maintaining a payout ratio below 65%, positioning Danone as a potentially reliable dividend-paying company with a responsible fiscal strategy.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that the company generates enough profit to sustain its dividend payments. A higher coverage ratio is preferable, demonstrating financial stability.

Based on the data provided, Danone's trend in covering dividends with earnings per share (EPS) has varied significantly over time. In 2018, the coverage ratio was 0.520, meaning the company almost halved its earnings into dividends. Although this isn't alarming, a higher ratio would be ideal. In 2019, it improved to 0.652, indicating better financial health. Entering 2020, the ratio skyrocketed to 1.394 due to an increased EPS and reduced dividends, showing robust ability to cover dividends. However, in 2021, it dipped again to 0.652, suggesting a decline. In 2022, the coverage ratio of 1.293 implied sufficient earnings relative to its dividends. By 2023, the ratio improved to 1.455, demonstrating financial discipline. Overall, the fluctuating coverage trends imply periods of strong earnings coinciding with profitability challenges in other years. Ideally, a stable or increasing coverage would indicate a more consistent financial footing. Danone seems to be making strides in this domain but needs to attain stability to mitigate risks from earnings inconsistencies. From a dividend investor's perspective, these trends are cautiously optimistic but warrant close monitoring.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicate that a company generates enough cash flow to meet its dividend payments without resorting to external financing or depleting cash reserves. This is crucial for the sustainability of the dividends.

Analyzing Danone's (BSN.DE) free cash flow and dividend payout amount from 2003 to 2023, the dividend coverage ratio has varied widely. Ideally, a coverage ratio above 1 indicates robust coverage, but Danone's ratio has frequently fallen below this mark. For instance, in 2003 it was exceptionally high at 19.39, but dropped dramatically below 1 in subsequent years, indicating potential risk in dividend sustainability. Recent years show some improvement, with ratios closer to but still under 1, signaling ongoing concerns about whether dividends are well-supported by free cash flow. This trend is not favorable for income-focused investors considering the reliability of future payouts.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are vital for income-seeking investors as they provide a reliable income stream and reflect company stability.

An evaluation of Danone's dividend history shows an initial absence of dividend payments in the early 2000s. Post-2008, there has been a relatively steady upward trend in dividend payments with a slight decrease in 2020 but not more than 20%. This trend can be seen improving again in 2023 with dividends at €2 per share, relative stability over the period.

Dividends Paid for Over 25 Years?

Explain the criterion for Danone (BSN.DE) and why it is important to consider

The criterion of Dividends Paid for Over 25 Years examines a company's ability to consistently provide dividends to its shareholders for a prolonged period, indicating its financial stability and commitment to returning wealth to investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to a company's consistent reduction of its number of shares over extended periods. This action can enhance earnings per share (EPS) and signal corporate confidence in its future prospects.

Danone has shown a relatively consistent effort in repurchasing shares over the last two decades. The average annual repurchase rate is 1.0819%, suggesting moderate but consistent share buybacks. Key repurchase years include 2004-2008, 2011-2013, and 2021-2022. Though there have been periods of increased shares, these might be attributable to reasons like dividend payments in shares or issuance for mergers and acquisitions. Overall, the trend is positive for long-term investors as it indicates a focus on shareholder value.