Last update on 2024-06-27

Carrier Global (CARR) - Dividend Analysis (Final Score: 6/8)

In-depth analysis of Carrier Global (CARR) dividends using an 8-criteria scoring system. Final score: 6/8. Learn about dividend stability and performance.

Short Analysis - Dividend Score: 6

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

Carrier Global (CARR) scored 6 out of 8 in the dividend analysis, suggesting it has a relatively strong but not perfect dividend policy. Key strengths include a low payout ratio (14.32%), good coverage of dividends by cash flow (improving trend up to 29%), and reliable share repurchases. However, the company lacks a long history of dividends (since only 2020) and dividend stability with significant variability noted especially from 0 in 2017 to $0.28 in 2020. Despite its growing trend in dividends, it has only 3 years of consistent dividend payments.

Insights for Value Investors Seeking Stable Income

Carrier Global (CARR) could be a plausible option for investors looking for growth and dividend income but carries some risks due to its short history of dividend payments and some past instability. If you're okay with a bit of uncertainty for potentially higher returns, it could be worth considering. Conversely, if you prioritize long-term dividend reliability and less volatility, you might want to explore other options with a longer and more stable dividend history.

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?

Explain the criterion for Carrier Global (CARR) and why it is important to consider

Dividend yield is a financial ratio that shows how much a company pays out in dividends relative to its stock price. A higher yield may indicate a good return on investment for shareholders. Considering Carrier Global's dividend yield compared to the industry average helps investors gauge its attractiveness as a dividend-paying stock. Monitoring trends in dividend yield over time can offer insights into the company's dividend policy and financial health.

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

The dividend growth rate indicates how much a company's dividend payments have increased over a specific period. It is important as it provides insight into the company's ability to generate and return profits to its shareholders. A growth rate above 5% is typically seen as favorable, indicating robust financial health and shareholder value enhancement.

To determine if Carrier Global's (CARR) dividend growth rate exceeds 5% over the last 20 years, we must examine its historical dividend data. However, the available data from 2017 to 2023 reveals significant yearly variability, with dividend per share values starting from zero and then varying, peaking at 82.1429 in 2021 before declining to 17.3228 in 2023. Given the late introduction of dividends, calculations must be period-sensitive.

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

The average payout ratio is a key financial metric that measures the proportion of earnings a company pays to its shareholders in the form of dividends. A lower payout ratio (preferably below 65%) often suggests that a company is retaining enough earnings for growth and future investments, which could benefit shareholders in the long term.

Based on the provided numbers, Carrier Global (CARR) has an average payout ratio of 14.32% over the last seven years, which is well below the benchmark of 65%. This is a positive trend as it indicates that Carrier Global has been retaining a significant portion of its earnings, presumably for reinvestment and business expansion. Historically, Carrier Global has not paid out dividends until 2020, which could be a sign of financial prudency as the company likely prioritized growth and stability before initiating payouts to shareholders. The increasing payout ratios in recent years could reflect a strong financial position, enabling the company to share more profits with shareholders while still maintaining an overall low average payout ratio. This is a healthy sign indicating both potential for future growth and a commitment to returning value to shareholders.

Dividends Well Covered by Earnings?

Explain the criterion for Carrier Global (CARR) and why it is important to consider

The criterion for evaluating if dividends are well covered by earnings primarily looks at the Dividend Payout Ratio, which is calculated as Dividend per Share (DPS) divided by Earnings per Share (EPS). This ratio indicates what portion of the company’s earnings is being returned to shareholders as dividends. A lower ratio suggests that the company is retaining more of its earnings for growth, which can be a positive sign for future profitability, whereas a higher ratio suggests the company is returning a large portion of its earnings, which could limit internal financing. Typically, a payout ratio of 40-60% is considered sustainable.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow considers the proportion of free cash flow that is paid out as dividends. It is important because it reflects a company's ability to sustain dividend payouts without compromising its financial stability.

The free cash flow (FCF) and dividend payout amounts for Carrier Global (CARR) over the period from 2017 to 2023 show varying levels of coverage. The FCF ranged from $1.38 billion to $2.13 billion, while the dividend payout totals rose from $138 million to $620 million. The ratio of dividends covered by cash flow improved markedly from ~7.8% in 2017 to ~29% in 2023. This trend is favorable, indicating CARR has become increasingly capable of sustaining its dividend payouts through its generated cash flows.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over a prolonged period is crucial for income investors because it ensures a reliable income stream and reduces risk.

Over the past 20 years, Carrier Global (CARR) has only provided dividend data starting from 2017, and there was a drop more than 20% in the reported years, namely from $0.0 to $0.28 in 2020. This volatility might raise concerns among stability-seeking investors.

Dividends Paid for Over 25 Years?

Examining whether a company has paid dividends consistently for over 25 years is crucial in assessing the reliability and stability of its dividend policy.

Carrier Global (CARR) has a dividend payment history from 2020 onwards, as shown by the dividend per share data: 0 in the years 2017, 2018, 2019, and then 0.28 in 2020, 0.51 in 2021, 0.635 in 2022, and 0.745 in 2023. This makes it evident that CARR has not paid dividends for a duration remotely close to 25 years. While the trend in increasing dividends over the recent years is positive, this very short history of dividend payments is a negative factor for investors who prioritize long-term dividend stability and reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's commitment to returning value to shareholders. It can be a sign of strong financial health, suggesting that the company has excess cash flow and a positive long-term outlook.

Carrier Global's share count data over the past 7 years reveals periods of consistent repurchases. Particularly, notable buybacks occurred in 2019, 2022, and 2023, contributing to a reduction in the share count from 872.8 million in 2017 to 837.3 million in 2023. This trend signifies a shareholder-friendly approach with a focus on returning value to investors. An average repurchase rate of -0.6845 indicates moderate though consistent activity. This is favorable as it shows a sustained commitment, albeit not robust across every year.