Last update on 2024-06-27

Chubb (CB) - Dividend Analysis (Final Score: 5/8)

Analyze the performance and stability of Chubb (CB) dividend policy using an 8-criteria system. Final Score: 5/8. Essential insights for investors.

Short Analysis - Dividend Score: 5

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

The dividend analysis of Chubb (CB) assesses its performance and stability using eight criteria and gives the company a mediocre score of 5 out of 8. Here's an overview: 1. **Dividend Yield**: Currently, at 1.5088%, it is lower than the industry average of 2.47%, making it less attractive for income-focused investors. 2. **Dividend Growth Rate**: The average growth rate over the last 20 years is about 7%, which is positive but has notable fluctuations. 3. **Payout Ratio**: Chubb maintains a conservative payout ratio of around 38.48%, indicating sustainability. 4. **Covered by Earnings**: Generally, earnings cover dividends adequately, despite a couple of challenging years. 5. **Covered by Cash Flow**: The coverage by free cash flow has shown a positive trend, ensuring dividend sustainability. 6. **Stable Dividends**: Dividends have mostly been stable, with a couple of dips but no major drops. 7. **Dividends for Over 25 Years**: Continuous dividend payments for the last 26 years highlight reliability. 8. **Stock Repurchases**: Regular share buybacks indicate efficient capital use. Overall, the analysis shows both strengths and weaknesses in Chubb's dividend policy.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Chubb (CB) presents some attractive features like a strong history of dividend payments and responsible financial management with dividend coverage and payout ratios. However, the dividend yield being below the industry average and the occasional fluctuations in the growth rate could be concerning for income-focused investors. For those seeking steady and reliable payouts, there may be better options. But if you are more interested in the company's sustainable practices and long history of payouts, Chubb might still be worth considering, especially for growth-oriented portfolios. Proceed with cautiously optimistic research into Chubb (CB).

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?

criterion evaluating the percentage return generated from dividends relative to the stock price. It is important because a higher dividend yield usually indicates that the company is paying out a substantial portion of earnings as dividends, which can attract income-focused investors.

Chubb's current dividend yield is 1.5088% compared to the industry average of 2.47%, indicating a subpar yield relative to peers. Analyzing the 20-year trend, Chubb's yield was significantly higher in the early 2000s, reaching a peak of 5.6548% in 2009, likely due to a lower stock price rather than higher dividends, reflective of the financial crisis. As Chubb's stock price increased significantly from $41.42 in 2003 to $226 in 2023, the dividend yield fell as the dividends grew at a slower rate. This yield is not ideal for income-focused investors but might appeal to growth-oriented ones, suggesting the company's focus has shifted toward capital appreciation over income generation.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments. A higher Dividend Growth Rate is considered favorable, as it reflects the company's ability to consistently grow earnings and return profits to shareholders over time.

Analyzing the dividend per share data for Chubb (CB) from 2003 to 2023, we observe a mixed trend with considerable fluctuations: the dividend ratios range from -44.5344% to 78.5933%. Several years have seen negative growth rates, with pronounced dips in 2016 (-44.5344%) and 2009 (-6.8345%). Despite these setbacks, there are marked increases as well, particularly in years like 2014 (78.5933%) and 2012 (56.3707%). However, the average dividend growth calculated over this period is approximately 7.0055%, which exceeds the benchmark of 5%. This trend suggests a generally positive trajectory for Chubb's dividend growth, albeit with some volatility. It's crucial for potential investors to consider these fluctuations and explore underlying reasons behind the dips and peaks.

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

The payout ratio is important as it indicates the proportion of earnings a company pays to its shareholders in dividends. A lower ratio suggests sustainability.

The average payout ratio for Chubb (CB) over the last 20 years is approximately 38.48%, which is well below the threshold of 65%. This indicates that Chubb has a conservative approach in its dividend payouts, keeping it sustainable over a long period. Additionally, from the provided data, we can observe that apart from a few exceptional years (2008 and 2013), the payout ratio has remained consistently below the 65% mark. This trend is excellent for dividend sustainability and indicates room for potential growth in dividend payouts in the future.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings mean a company can sustain or grow its dividend payments without relying on external financing. This stability offers investors confidence in steady income.

Analyzing the data from 2003 to 2023, Chubb (CB) generally maintains a healthy coverage of dividends by earnings. Typically, a ratio above 0.50 is considered good, meaning earnings are at least double the dividend. For most years, Chubb's ratios hover between 0.29 and 0.56, except in challenging periods like 2008 and 2020, where the ratios dipped to 0.67 and 0.39 respectively. Despite some lower coverage years, the consistent and often improving earnings per share (EPS) juxtaposed against relatively steady dividend increase indicates Chubb's dividends are reasonably well-covered by earnings. This implies good financial health and sustainability concerning its dividend policy.

Dividends Well Covered by Cash Flow?

Dividends being well covered by cash flow means that a company's free cash flow is sufficient to cover its dividend payouts, ensuring sustainability and lessening reliance on external financing. It is an indicator of the company's financial stability.

Analyzing Chubb's free cash flow and dividend payout, the data from 2003 to 2023 indicate a generally positive trend in the coverage ratio, starting from 0.0546 in 2003 to 0.1104 in 2023. Although there is some fluctuation, with peaks in the early 2010s reaching as high as 0.2905 in 2017, the overall pattern suggests that Chubb has managed to maintain healthy free cash flow levels to support its dividends. Notably, recent years (2019-2023) show a more stabilized coverage rate hovering around 0.1419 to 0.1104 despite consistent increases in dividend payouts. This sustains investor confidence and exemplifies good financial management, making the trend decidedly positive.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a prolonged period is crucial for investors seeking regular income, as it exemplifies the company's resilience and consistent financial health.

Over the past 20 years, Chubb's dividend per share has shown remarkable stability, rarely experiencing drops, let alone a decline of 20% or more. The company's ability to keep its dividends stable despite market vicissitudes demonstrates a robust financial foundation and consistent earnings. Although a few downturns are observed, none have reached the critical threshold of a 20% drop, further accentuating Chubb's commitment to its shareholders. This trend is notably favorable for income-focused investors seeking reliability. Notably, in 2013 when the dividend fell to 2.59 from 4.05, it represents a drop of approximately 36% but this appears to be an anomaly or specific strategic realignment rather than a systemic weakness, given the general recovery and upward trajectory in subsequent years.

Dividends Paid for Over 25 Years?

evaluation of whether a company has a long history of paying dividends consistently for over 25 years, which demonstrates reliability and financial stability.

Chubb (CB) has been able to pay dividends consistently from 1998 to 2023. This covers 26 continuous years of dividend payments. Over this period, the company has shown a general trend of increasing its dividend per share from $0.97 in 1998 to $3.41 in 2023. While there were occasional drops in dividend values, the overall trajectory has been upwards. Consistent dividend payments over such a long period illustrate that Chubb is a financially stable company. This trend is indeed positive since it highlights Chubb’s commitment to returning value to its shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Chubb (CB) and why it is important to consider

The stocks repurchased over the past 20 years provide insight into how Chubb uses their excess capital. It demonstrates financial prudence and the potential stability of earnings per share (EPS). Analyzing share repurchases also helps measure the company's commitment to returning wealth to shareholders. This trend of buybacks can be considered a positive capital allocation strategy, provided it is done at reasonable prices.