Last update on 2024-06-27

CF Industries Holdings (CF) - Dividend Analysis (Final Score: 5/8)

Detailed dividend analysis of CF Industries Holdings shows moderate performance and stability, scoring 5/8 based on an 8-criteria scoring system.

Short Analysis - Dividend Score: 5

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

CF Industries Holdings (CF) has been analyzed on an 8-criteria system to evaluate the performance and stability of its dividend policy. CF's dividend yield is markedly lower than the industry average (2.0126% vs. 12.48%) but shows consistency and strategic balance. The company boasts a healthy dividend growth rate over the past 20 years and maintains a low average payout ratio of 16.53%, indicating stability. Dividends have generally been well covered by earnings, although there have been fluctuations and some negative periods. Most of CF's dividends are covered by cash flows, further supporting sustainability. However, CF has only been paying dividends since 2005, falling short of the 25-year benchmark. Stock repurchases indicate a reasonable commitment to returning value to shareholders. Overall, CF exhibits stable, conservative dividend policies with cautious growth strategies.

Insights for Value Investors Seeking Stable Income

CF Industries Holdings may be a prudent investment for those seeking stable, albeit modest, dividends with a focus on financial health and sustainability. While it lacks the long-term dividend history of some peers, its consistent performance and balanced approach make it a viable option for conservative investors. However, potential investors should be cautious of the volatility in earnings and monitor future performance closely.

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 refers to the dividend income investors receive as a percentage of the stock price, reflecting the company's profitability and its willingness to distribute profits. It is crucial for assessing income potential and investment attractiveness.

CF Industries Holdings (CF) boasts a current dividend yield of 2.0126%, markedly outperforming the industry average of 12.48%. While the given figure may seem relatively lower, there's a noticeable consistency in CF's dividend delivery. Historically, CF started modestly from 0% yields two decades ago, peaking around 2016 and steadily fluctuating since then. Conversely, the industry grappled with significant volatility, spiking to unsustainable highs over time. Despite its modest yield, CF's strategic position and consistent, albeit lower, yield suggest a balanced, less speculative income-generation approach. This trend leans towards a prudent investment strategy rather than chasing high, volatile yields.

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

Explain the criterion for CF Industries Holdings (CF) and why it is important to consider

The Dividend Growth Rate is a significant measure of a company's commitment to returning profits to shareholders through dividends. It indicates the sustainability and growth of dividend payments. A higher dividend growth rate, generally above 5%, is a positive indicator of a company's financial health and shareholder benefit, suggesting a consistent profit margin over time. This can attract investors, enhancing share value and market perception.

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

Analysis of payout ratios provides insight into how much of its earnings CF Industries Holdings distributes as dividends and whether it can sustain this level of distribution.

The average payout ratio over the last 20 years for CF Industries Holdings is 16.53%, which is significantly below the threshold of 65%. A lower payout ratio is generally a good indicator as it suggests that the company retains a significant portion of its earnings for reinvestment and growth. Furthermore, this low payout ratio means the company has a cushion to maintain dividend payments even during periods of earnings decline, contributing to the sustainability of the dividend policy. In particular, the payout ratio has varied widely over the years, even turning negative in 2005 and 2016, and peaking at high values in 2015, 2016, and 2020. Despite these fluctuations, the overall average remains low and favorable for long-term dividend stability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This means that the company generates enough profit to pay out dividends. A high earnings per share to dividend ratio is ideal as it indicates that the company is not over-leveraging itself to pay dividends, thus ensuring long-term sustainability.

In examining CF Industries Holdings' dividend coverage from the data provided, there have been years where dividends were not well covered by earnings, particularly in 2013 and 2016, where negative earnings per share adversely impacted coverage ratios. However, for most years when the company had positive earnings, dividends were generally well covered. For example, in 2021, the ratio was approximately 0.281, and in the prosperous year of 2022, dividends were covered even better with a ratio of 0.091, though there is a sharp decline in 2023 to a ratio of 0.203. While the trend is relatively positive with high coverage in most profitable years, the volatility in EPS does pose some risks. Overall, CF demonstrates a reasonable ability to cover its dividends, but investors should monitor the EPS fluctuations closely.

Dividends Well Covered by Cash Flow?

Explain the criterion for CF Industries Holdings (CF) and why it is important to consider

Dividends being well covered by cash flow are critical for assessing the sustainability of the dividend payment. If a company consistently covers its dividend payouts with its free cash flow, it indicates a strong ability to sustain or even grow its dividend in the future. Conversely, if dividends are not well covered by cash flow, it signals potential risks to the dividend's reliability.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for CF Industries Holdings (CF) and why it is important to consider

Stable dividends over the past 20 years are a critical consideration for income-seeking investors. It indicates a company's consistent ability to generate cash flow and return capital to shareholders, mitigating the risk of significant income loss. For CF Industries, the goal is to identify whether the dividend per share did not drop by more than 20% in any given year over the past two decades.

Dividends Paid for Over 25 Years?

Evaluating whether a company has consistently paid dividends for over 25 years provides insight into its financial stability and shareholder value. Consistent dividends suggest a company’s commitment to rewarding shareholders and its ability to generate continuous cash flows.

CF Industries Holdings (CF) has not consistently paid dividends for over 25 years. According to the data, CF started paying dividends in 2005, and has shown an upward trend in dividend values since then, reaching 1.6 per share in 2023. This 18-year history of dividend payments does indicate growing shareholder returns and financial stability in recent years. However, it falls short of the 25-year benchmark, suggesting there might not be enough data to fully assess long-term stability and commitment to shareholders, despite the positive trend over the available period.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for CF Industries Holdings (CF) and why it is important to consider

Stock repurchases, or buybacks, reflect a company's strategy to return value to shareholders by purchasing its own shares, usually indicating that management believes the shares are undervalued. Regularly repurchasing shares over two decades can suggest a committed approach to shareholder value and capital allocation.