Last update on 2024-06-27

Proximus (BX7.F) - Dividend Analysis (Final Score: 4/8)

In-depth analysis of Proximus (BX7.F) dividend policy with a final score of 4/8. Understand its performance, stability, and sustainability through 8 criteria.

Short Analysis - Dividend Score: 4

We're running Proximus (BX7.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of Proximus (BX7.F) shows mixed results based on the 8 assessment criteria for dividend performance and stability: - **Dividend Yield**: Generally higher than the industry average, but declining share value is concerning. - **Dividend Growth Rate**: No consistent growth over 20 years, with high fluctuation. - **Payout Ratio**: Average payout of 72.18%, exceeding the sustainable 65% threshold, indicating potential issues with future payouts. - **Earnings Coverage**: Inconsistent ability to cover dividends, signifying potential sustainability issues. - **Cash Flow Coverage**: Generally strong, with sufficient cash flow to cover dividends recently. - **Stability of Dividends**: Payments are unstable, often fluctuating year-over-year. - **History of Dividends**: No consistent payment over 25 years; started in 2006. - **Stock Repurchases**: Unclear from data, but indicative for investor confidence. All these reveal that Proximus has high yields but struggles with stable, sustained, and well-covered payouts over the long term.

Insights for Value Investors Seeking Stable Income

Given the analysis, investing in Proximus (BX7.F) might be risky if you're seeking steady and growing dividends. The high dividend yield is attractive, but it's countered by an inconsistent payout history and potential sustainability issues. Unless you're a high-risk investor or believe in the company's future turnaround, it may be wise to look for more stable options.

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.

Proximus (BX7.F) currently has a dividend yield of 8.2353%, significantly higher than the industry average of 3.56%. Observing historical data, Proximus has frequently offered a higher dividend yield compared to the industry average across the last two decades. For example, in 2022 the yield soared to 13.32%, more than quadruple the industry average of 2.61%. However, it is critical to analyze the sustainability of these dividends; Proximus' stock price has generally declined, suggesting that while dividends may be attractive, the underlying value of the shares is declining—potentially a red flag for long-term value investors.

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

The Dividend Growth Rate measures the average annual growth rate of a company's dividend payments over a specified period. It is important as it indicates the company's ability to increase its dividend payments.

Proximus (BX7.F) has not demonstrated a consistent dividend growth rate over the last 20 years. The dividend per share ratio has fluctuated unpredictably, with values ranging from -67.1053 to 336, and several years having no dividends at all. Despite an average dividend ratio of 8.4059, this ratio alone is not reliable, given the significant variability. Therefore, Proximus does not meet the criterion of having a dividend growth rate higher than 5% in the last 20 years. This inconsistency is a red flag for dividend growth investors.

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

Criterion 1.2 examines whether the average payout ratio is lower than 65% over the past 20 years. This threshold is important as it suggests a balance between rewarding shareholders and retaining earnings for growth.

The average payout ratio for Proximus (BX7.F) over the past 20 years is approximately 72.18%. This figure significantly exceeds the 65% threshold. High payout ratios can indicate that a company is distributing a large portion of its earnings as dividends, leaving less room for reinvestment and growth. From 2003 to 2023, Proximus has exhibited payout ratios higher than 100% in several years, specifically 2011 to 2015 and 2017 to 2019, which is unsustainable in the long term. Only from 2003-2005 and in 2023, did the payout ratio remain below the critical 65% mark. Thus, Proximus has consistently failed to meet this criterion, signaling potential issues with its dividend sustainability and less financial flexibility for growth or emergency funding, making this trend concerning for long-term investors.

Dividends Well Covered by Earnings?

This criterion evaluates if the company's earnings are sufficient to cover the dividends paid to shareholders. It helps gauge the sustainability of the dividend payouts. A dividend payout ratio (dividends per share divided by earnings per share) below 1 indicates that earnings adequately cover dividends, which is crucial for long-term dividend stability.

At a glance, Proximus (BX7.F) exhibits an inconsistent ability to cover its dividends with its earnings. The coverage ratio oscillates significantly, reflecting periods where dividends surpass earnings (coverage ratio above 1), such as in 2015 (1.002), 2016 (0.925), and 2017 (0.928). Alternatively, in recent years—2023 (0.63) and 2022 (0.86)—the trend shows enhanced earnings coverage. Notably, ideal coverage, where dividends are well matched or below earnings, appears intermittent. This volatility could signal potential payout sustainability issues, particularly given the recent downward trend in coverage. Ensuring dividends remain firmly covered by earnings relative to both historical and industry benchmarks will be crucial for the stability and attractiveness of Proximus's dividend program.

Dividends Well Covered by Cash Flow?

The ratio of free cash flow to dividends, often referred to as dividend coverage, is an essential criterion to assess a company's financial health. A ratio above 1 indicates that the company's dividends are well-covered by its free cash flow, suggesting sustainability. Conversely, a ratio below 1 could signal potential financial distress.

Reviewing the dividend coverage ratio for Proximus (BX7.F) from 2003 to 2023 reveals significant fluctuations. Notably, the company had insufficient free cash flow to cover dividends in 2003, with a ratio of -2.14. However, from 2004 onwards, the ratio generally remained above 0.5, often exceeding 1 in several years (notably, 2012, 2013, 2014, 2017, 2018, 2020, 2022, and 2023), where it was significantly above 1.5. The pronounced increase in 2023 to 2.32 is particularly commendable, indicating robust financial health. However, dips such as seen in 2011 (0.88) and 2021 (0.80) highlight occasional discrepancies. Overall, the trend reflects a relatively strong capacity to sustain dividends, with recent years showing better coverage. This trend is positive and suggests Proximus is effectively managing cash flows to honor its dividend commitments.

Stable Dividends Since the Company Began Paying Dividends?

Explanation of Stable Dividends Over the Past 20 Years, including the criteria for stability and importance for investors.

Dividend stability is critical for income-seeking investors as it ensures a reliable income stream. Reviewing Proximus (BX7.F), over the past 20 years, the dividend payments showed substantial fluctuation, especially evident in certain years such as 2007, 2020, and 2023, with dividends of 0.5, 1.2, and 0.7 respectively. Although there are some evident declines year over year, the major shifts did not exceed the 20% drop threshold consistently across the two decades. This trend remains vital to study for overall long-term financial stability.

Dividends Paid for Over 25 Years?

This criterion assesses if the company has a reliable history of paying dividends over 25 years, indicating its financial stability.

Proximus (BX7.F) has not consistently paid out dividends over the past 25 years. According to the data, Proximus only started paying dividends in 2006, with the amounts fluctuating significantly year-over-year and particularly decreasing in more recent years (down to 0.7 in 2023 from a peak of 2.18). This inconsistent dividend history, especially considering no dividends were paid in its earlier years, may raise concerns regarding the company's long-term financial stability and reliability in providing shareholder returns. Thus, this trend is bad for the criteria of having a stable dividend payment history.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Proximus (BX7.F) and why it is important to consider

Stock repurchase programs are important for investors as they imply a company’s confidence in its financial health and prospects. A sustained buyback strategy results in higher earnings per share (EPS), increasing shareholder value. Reliable stock repurchases over the past 20 years indicate financial stability and a shareholder-friendly approach.