Last update on 2024-06-27

Celanese (CE) - Dividend Analysis (Final Score: 5/8)

In-depth analysis of Celanese (CE) dividend performance, evaluating its policy using an 8-criteria scoring system. Final Dividend Score: 5/8.

Short Analysis - Dividend Score: 5

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

Celanese (CE) was analyzed for its dividend policy using an 8-criteria scoring system and secured a score of 5. Here's a summary: 1. **Dividend Yield**: Currently at 1.8021%, which is lower than the industry average of 4.85%, indicating it's less attractive for dividend-focused investors. 2. **Dividend Growth Rate**: Shows inconsistency despite an average growth rate of 21.41%. Some years witnessed no dividends while other years saw significant peaks, making it unreliable for consistent income focus. 3. **Payout Ratio**: Maintained an exceptionally low average of 14.88%, well below the 65% benchmark, indicating judicious earnings management. 4. **Dividend Coverage by Earnings**: Trending positively with earnings, suggesting sustainability despite some recent below-ideal ratios. 5. **Dividend Coverage by Cash Flow**: Varied trends, but recent improvements show a sustainable balance between cash flow and dividend payouts. 6. **Stable Dividends**: No recorded drop of more than 20%, showcasing consistent, growing dividends since 2005. 7. **Long-term Dividend Payments**: Paid dividends since 2005, reflecting growth but not meeting the 25-year criterion. 8. **Stock Repurchases**: Demonstrated reliable buybacks starting in 2007, reducing shares by about 36% and boosting shareholder value.

Insights for Value Investors Seeking Stable Income

While Celanese shows promise in various aspects like maintaining low payout ratios and reliable stock repurchases, its lower-than-industry-average dividend yield and inconsistent dividend growth rates might be concerning for dividend-focused investors. If you prioritize steady and high dividend returns, it might be worth exploring other stocks. However, if you appreciate robust earnings management and share repurchases, Celanese could be a viable option for portfolio diversification.

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 Celanese (CE) and why it is important to consider

Celanese currently has a dividend yield of 1.8021%, significantly lower than the industry average of 4.85%. Over the last 20 years, CE's dividend yield has fluctuated, reaching its peak in 2020 at 2.68%. This variance shows that CE has considerably lagged behind the industry in providing steady and high dividend yields to shareholders. Even though CE consistently offered dividends, its yield has typically fallen below the industry's performance, which may indicate lesser attractiveness to dividend-focused investors. Especially when comparing recent years, the trend points towards uncompetitive dividend payments relative to the industry. This isn't favorable if one views dividends as a key investment criterion.

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

The dividend growth rate represents the annualized percentage growth of a company's dividend. A rate higher than 5% indicates robust dividend growth, which is crucial for attracting income-focused investors.

In analyzing Celanese's (CE) dividend growth rate over the last 20 years, it's essential to look at the yearly changes in the company's dividend per share. The data shows significant variability, with no dividends paid in specific years (2003-2005, 2007-2009), and remarkable peaks in other years (e.g., 100% in 2006, 94.4444% in 2013). Despite some high growth years, the company's dividend per share growth is inconsistent overall. The average dividend growth rate is 21.41%, which on the surface seems impressive. However, the inconsistency and several years of no dividends might be a concern for long-term, income-focused investors. Therefore, while the average growth appears strong, the negative trend in specific years and inconsistency make this trend bad for consistent dividend growth criterion.

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

The average payout ratio is the percentage of earnings a company distributes to its shareholders as dividends. Maintaining a payout ratio below 65% over an extended period indicates that the company is retaining sufficient earnings for reinvestment, growth, or to cushion future financial downturns.

Celanese (CE) has maintained an exceptionally low average payout ratio of 14.88% over the past 20 years, which is significantly lower than the 65% benchmark. With the payout ratios ranging from 0% to 57.61%, Celanese has demonstrated a consistent ability to not just meet but substantially exceed this criterion. This trend is advantageous because it indicates that Celanese is judiciously managing its earnings by retaining a substantial portion for growth and other corporate strategies, while simultaneously remaining committed to shareholder returns. This low payout ratio provides a cushion for the company during economic downturns or periods of profit instability, ensuring sustainability and continued dividend payments.

Dividends Well Covered by Earnings?

Why it is important for dividends to be well covered by earnings

Dividend coverage ratio refers to the number of times a company is able to pay dividends to its shareholders using its net income. A high ratio indicates good sustainability of dividends, but it must be balanced - excessively high ratios may mean the company is not leveraging shareholder value optimally. A ratio closer to or above 1 is ideal as it shows the company is retaining enough earnings to fund and grow the business while rewarding shareholders. Celanese's trend shows generally increasing earnings per share, especially significant jumps in 2019-2023, providing an adequate base for consistent dividend payments. Although the dividend coverage ratio is below 1 in the recent years, implying distributed dividends are high compared to earned income, the significant growth potential shown by the earnings per share increase suggests an overall positive outlook on dividend sustainability for Celanese.

Dividends Well Covered by Cash Flow?

The criterion of dividends being well-covered by cash flow is crucial for assessing a company's ability to sustain and potentially grow its dividend payouts. It represents the proportion of dividends paid out relative to the company's free cash flow (FCF).

Celanese (CE) has exhibited varied trends in its dividend coverage ratio over the past two decades. In the early 2000s, coverage was extremely low, even negative for 2004, indicating that the free cash flow was insufficient to cover dividend payouts. This situation dramatically improved by 2005, with nearly 164% coverage, showing more than enough FCF to handle dividend obligations. However, fluctuations are evident throughout the years, with notable highs like 2005 (1.64) and 2013 (0.215), and lows like 2003 (0.132) and 2006 (0.079). From 2015 onwards, the coverage ratio stabilizes around 0.23 to 0.31. This trend suggests a positive and cautious approach towards maintaining the balance between free cash flow and dividends. Overall, recent stability and historical highs indicate that CE manages its dividend payouts effectively, but consistent monitoring is essential given earlier inconsistencies. The trend in the past decade reflects a solid and sustainable dividend policy, albeit with some room for improvement towards reaching at least a consistent 0.30 ratio or higher.

Stable Dividends Since the Company Began Paying Dividends?

The criterion evaluates the stability of dividend payments, ensuring that they did not drop by more than 20% over the past two decades. This is crucial for income-seeking investors, who prioritize consistent dividend income.

Looking at the dividend payments data over the last 20 years, Celanese (CE) has shown a growing trend in its dividends per share, from $0.08 in 2005 up to $2.80 in 2023. However, the company started paying dividends only from 2005, meaning there were no dividends from 2003 to 2004. It indicates that the company didn't reduce its dividends by more than 20% in any given year since it started paying dividends. The increase is substantial, with notable jumps in 2011 (94% increase from $0.27 to $0.525), 2014 (77% increase), and 2005 (100% increase). The consistency and growth in dividend payouts make Celanese an attractive stock for income-focused investors. No year has been highlighted where dividends dropped by more than 20%, underscoring solidity and financial health.

Dividends Paid for Over 25 Years?

An analysis of whether a company has consistently paid dividends for more than 25 years is important. This demonstrates the firm's commitment to returning value to shareholders over the long term and reflects financial stability.

Based on the provided data, Celanese (CE) has not paid dividends for over 25 consecutive years. The dividend payments started in 2005 with a dividend per share of $0.08. Since then, the company has shown a consistent upward trend in dividend payouts. The dividends increased from $0.08 in 2005 to $2.80 in 2023, representing a notable growth. This upward trend is a positive sign of CE's strong financial performance and commitment to shareholder returns, but the period of dividend payment history is currently only 19 years as of 2023, which means it does not meet the 25-year continuous dividend payment criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases, or buybacks, reduce the number of shares in circulation, potentially boosting earnings per share and stock prices. Consistent buybacks may indicate strong financial health.

Over the last 20 years, Celanese has shown a pattern of reliable stock repurchasing beginning significantly in 2007. From 2007 to 2022, there have been notable reductions in the number of shares from 171,227,997 in 2007 to 108,848,962 in 2022—a decrease of about 36%. Average share repurchases per year of approximately 6.29% indicate a consistent effort to reduce outstanding shares, enhancing shareholder value. This trend is positive, showcasing Celanese's commitment to returning capital to shareholders and possibly indicating strong financial management and performance.