Last update on 2024-06-27

Boston Properties (BXP) - Dividend Analysis (Final Score: 3/8)

Analyze the performance and stability of Boston Properties (BXP) dividend policy with our 8-criteria scoring system. Final Score: 3/8

Short Analysis - Dividend Score: 3

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

The analysis on Boston Properties (BXP) reveals a mixed bag when it comes to its dividend policy. Here are the key takeaways: 1. **Dividend Yield:** While the current dividend yield is 5.5864%, it is slightly below the industry average of 6.18%, though past yields have shown resilience during tough economic periods. 2. **Dividend Growth Rate:** There's no clear information provided about a consistent dividend growth rate higher than 5% over the last 20 years. 3. **Payout Ratio:** BXP's average payout ratio is a concerning 128.74%, much higher than the recommended 65%, raising questions about dividend sustainability. 4. **Earnings Coverage:** Dividend coverage by earnings is inconsistent, with some years showing low ratios, indicating unsustainability at times. 5. **Cash Flow Coverage:** Fluctuating ratios suggest that dividends often exceed free cash flow, posing a potential risk unless other financial mechanisms compensate. 6. **Stability:** The dividends have been relatively stable for roughly the last four years, but historical volatility is a concern. 7. **Long-Term Payments:** BXP has paid dividends for over 25 years, indicating a commitment to returning value to shareholders despite volatility. 8. **Stock Repurchases:** There have been very few stock repurchases, leading to potential dilution for shareholders.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Boston Properties (BXP) shows some strengths in its dividend policy but has notable weaknesses, especially concerning payout ratio and cash flow coverage. If you are an investor looking for high and stable dividends, you might want to be cautious with BXP due to its inconsistencies and high payout ratios. Overall, it might be worth looking at more stable alternatives in the REIT sector or monitoring BXP closely for future improvements in their dividend policy.

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 indicates how much a company pays out in dividends each year relative to its stock price. This metric is vital for income-focused investors as it provides insight into the cash income on the capital invested in the stock.

Boston Properties’ (BXP) current dividend yield stands at 5.5864%, which, while respectable, does fall slightly short of the industry average of 6.18%. Historically, BXP's dividend yield has shown considerable volatility. For example, in 2019, the yield was notably lower at 2.7782%, but recent years have witnessed an upward trend, peaking at 5.8005% in 2022. However, BXP’s current and historical yields generally fall in line with or exceed the broader Real Estate Investment Trust (REIT) industry's yields during challenging periods, such as the financial crisis of 2008, where their yield jumped to an impressive 9.4761%. Overall, while BXP's yield is slightly below the industry average, it is within a notable range and display trends of stability and resilience under market pressures, indicating a moderately favorable scenario from an investor's perspective.

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

Explain the criterion for Boston Properties (BXP) and why it is important to consider

The criterion here is the Dividend Growth Rate, which needs to be higher than 5% over the last 20 years. This is important because a consistent growth rate in dividends is a positive indicator of a company's financial health and commitment to returning value to its shareholders.

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

Payout Ratio measures what percentage of earnings a company pays out as dividends. This is an indicator of both the stability and sustainability of a company's dividend policy, as well as its capacity for growth.

Analyzing Boston Properties (BXP)'s payout ratio from 2003 to 2023, we observe that the average payout ratio is 128.74%, significantly above the desired threshold of 65%. Historically, consistent payout ratios above 100% indicate that the company is paying out more in dividends than it earns, which is not sustainable over the long term. Years like 2008, 2014, and 2023 exhibit extremely high payout ratios (263.46%, 245.37%, and 323.27% respectively), exacerbating this concern. This trend is concerning as consistent high payout ratios may undermine the company's ability to reinvest in its core operations and could potentially lead to a reduction in future dividend payments or necessitate funding through debt, both of which pose risks for investors. Hence, Boston Properties' payout ratio history raises red flags about its dividend sustainability and financial health. Adjusting dividends or earnings improvements may be necessary to align with prudent payout practices.

Dividends Well Covered by Earnings?

The ratio of dividends covered by earnings is crucial to gauge a company's ability to sustain and possibly grow its dividend payments without leveraging debt or capital reserves. A high ratio indicates healthier, more sustainable dividend payments.

Analyzing Boston Properties' coverage ratio over time, we see that dividends were particularly well-covered in 2009 and recent years, with coverage ratios of 2.63 in 2008 and 3.23 in 2023. However, there are concerning years like 2008, 2010, 2018, and 2022, where the ratio is under 1, indicating that dividends exceeded earnings. This trend is mixed. While the increased coverage in some years is positive, the inconsistency raises questions about sustainability.

Dividends Well Covered by Cash Flow?

Explain what it means for dividends to be covered by cash flow and why this is an important criterion for Boston Properties (BXP).

Dividends covered by cash flow is a critical metric for assessing the sustainability of a company's dividend payments. For Boston Properties (BXP), a company distinguished in the REIT sector, this metric underlines its capacity to distribute dividends to shareholders from its generated cash flow. An optimal scenario is where the cash flow sufficiently covers the dividend payouts, indicative of strong financial health and dividend reliability. Examining the data: from 2003 to 2023, we see ratios fluctuating. Years 2003 (4.75), 2005 (9.07), 2009 (2.05), and 2011 (2.07) exemplify periods where the dividends were substantially covered by cash flow, reflecting robustness. Contrarily, negative ratios in 2006 (-3.43), 2007 (-2.27), and 2008 (-82.02) show periods of vulnerability. More recent years from 2011 to 2023 present ratios mostly below 1, suggesting dividends frequently exceeded free cash flow—a potential red flag for dividend sustainability unless compensated by other financial mechanisms like asset sales or leveraging. Hence, comprehending this indicator is vital, particularly for a REIT like Boston Properties, where dependable dividend payments are pivotal.

Stable Dividends Since the Company Began Paying Dividends?

Why it is important to analyze stability in dividend payments over a long period.

For Boston Properties (BXP), examining the dividend per share over the last 20 years reveals several instances where the dividends experienced significant volatility. While there isn't any specific year where the dividend per share dropped exactly by 20% from the previous year, there are noteworthy fluctuations, notably the dramatic drops in 2009 (2.18 from 8.7) and in 2016 (2.7 from 7.1). Such instability is generally concerning for income-seeking investors, as predictability in dividend income is crucial for financial planning. Nonetheless, BXP has shown some resilience in more recent years with dividends stabilizing around $3.92 per share in the last four years, indicating a more steady trend which is favorable for prospective investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is a measure of a company's ability to consistently share profits with its shareholders. It reflects financial stability, long-term profitability, and commitment to returning value to investors. Companies meeting this criterion are generally seen as reliable and lower-risk investments.

Boston Properties (BXP) has paid dividends for over 25 years, consistently offering returns to its shareholders. Over this period, the dividends per share have shown a general upward trend, punctuated by occasional peaks and troughs. For instance, in 2005 and 2006, the dividends surged to $5.19 and $8.12 respectively, showing a significant increase compared to previous years. More recent years, from 2020 to 2023, see dividends stabilizing at $3.92 per share. This demonstrates BXP's strong dividend-paying history and suggests a commitment to maintaining shareholder returns. Such a trend is a good indicator of financial strength and reliability, bolstering investor confidence.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Boston Properties (BXP) and why it is important to consider

Boston Properties (BXP) has not engaged in significant share repurchases over the past 20 years. The trend from 2003 to 2023 shows an increase in the number of shares outstanding from 98,486,000 to 156,863,500, indicating stock issuance rather than repurchases. With only one reliable repurchase year (2019) in the last 20 years and an average repurchase trend of merely 2.3969%, it is clear that BXP does not prioritize returning capital to shareholders through buybacks. This trend can be perceived negatively as it suggests potential dilution for existing shareholders and indicates that the company prefers to use its capital for other purposes, such as reinvestment in properties or debt reduction rather than buyback. Without consistent repurchase actions, shareholders may see little benefit in terms of stock price support that buybacks typically offer, which can be a discouraging sign for investors.