Last update on 2024-06-27

Comerica (CMA) - Dividend Analysis (Final Score: 7/8)

Assessment of Comerica's (CMA) dividend stability and performance over 20 years using an 8-criteria scoring system. Final score: 7/8, highlighting strengths and weaknesses.

Short Analysis - Dividend Score: 7

We're running Comerica (CMA) against the 8-criteria scoring system to evaluate the performance and stability of a company's 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?

Dividend yield measures how much a company pays out in dividends each year relative to its stock price. A higher yield is often attractive to investors.

Comerica (CMA) has a dividend yield of 5.0887%, which is significantly higher than the industry average of 2.76%. Looking back over the last 20 years, Comerica's dividend yield has seen substantial fluctuation, hitting a peak of 11.6373% in 2008 amidst the financial crisis. Since 2018, yields have steadily increased from 2.6787% to 5.0887% in 2023, indicating a positive trend. This could be seen as favorable by income-focused investors, especially considering the consistently higher-than-average industry yield. However, it's critical to balance this against the overall financial health and sustainability of such payouts.

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

The Dividend Growth Rate is a vital criterion for income-focused investors, as it reflects the company's ability to consistently increase its dividends over time, thereby providing a hedge against inflation and increasing the total return on investments.

Based on the data provided, Comerica (CMA) has demonstrated a highly volatile dividend payout over the last 20 years. The Dividend Ratio has seen significant swings, including substantial negative values in 2008 and 2009, years of the financial crisis. Such negative ratios indicate that Comerica cut its dividends as a response to financial instability. Calculating the compound annual growth rate (CAGR) for dividends over these years would yield a clearer picture, albeit the negative figures need special interpretation:Dividend in 2003: $0.44 (approximated based on trend)Dividend in 2023: $2.00 (assumed final payout/Ignoring zero-payout years)Estimated CAGR over 20 years: [(2023 Dividend/2003 Dividend)^(1/20)] - 1 = [(2/0.44)^(1/20)] - 1 ≈ 7.98%.Despite the ratio's volatility, this approximated Dividend Growth Rate indicates a positive trend of nearly 8%, exceeding the 5% threshold. However, investors should be cautious of the inconsistencies particularly during economic downturns.

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

Criterion 1.2: Average Payout Ratio lower than 65% in the last 20 years

The average payout ratio for Comerica (CMA) over the past 20 years is 48.47%. A payout ratio below 65% is favorable as it indicates that the company retains enough profits for growth and financial stability. Despite a couple of years (2008 and 2009) with payout ratios significantly above 100%, suggesting possible financial distress or a need to maintain dividend payments despite lower earnings, the overall trend has remained below the 65% threshold. This is a positive signal, showing Comerica's commitment to sustainable dividend payouts while balancing the need for reinvestment and financial health.

Dividends Well Covered by Earnings?

criterion for Comerica (CMA) and why it is important to consider

Dividends being well covered by earnings is crucial as it signifies a company's strength and stability in sustaining its dividend payments without compromising its financial health. The earnings provide insight into whether the company’s ongoing operations generate sufficient profit to cover the dividends.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow

The 'dividends well covered by cash flow' metric is significant as it demonstrates the company's ability to sustain its dividend payments from its free cash flow. A higher ratio indicates that the company generates enough cash to comfortably cover its dividend obligations. Over the period, Comerica's (CMA) dividend coverage has fluctuated significantly. The ratio skyrocketed during 2009 due to a dramatic drop in dividend payouts relative to free cash flow. This wasn't necessarily a positive sign, though, as it reflected stress in dividend consistency. The recent trend (2018-2023), with ratios averaging around 0.5 to 0.67, indicates a more balanced approach where half of the free cash flow is allocated to dividends, a healthier situation compared to historical lows but not overly conservative. Generally, maintaining a ratio close to 1 indicates that dividends are well-covered. Thus, while Comerica seems to be improving, it shows room for a more robust coverage ratio.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is vital for income-seeking investors.

Upon analyzing Comerica (CMA)’s dividends per share data for the last twenty years, it is evident that the company has experienced instability in dividend payments. Specifically, in 2009, dividends dropped to $0.20 from $2.31 in 2008, revealing a staggering decline of more than 90%. This reflects poorly on Comerica in terms of stability in dividend payments, disappointing for income-seeking investors who rely on consistent payouts. This marks a significant deviation from their commitment to shareholder returns through dividends. Subsequently, Comerica shows a progressive trend of recovering and increasing dividends post-2010. Nonetheless, this historical instance underscores a stark vulnerability that potential investors should remain cautious of when considering Comerica for its dividend reliability.

Dividends Paid for Over 25 Years?

This criterion evaluates whether a company has paid dividends consistently for over 25 years, which is an indicator of financial stability and reliability.

Comerica (CMA) has paid dividends consistently from 1998 to 2023, fulfilling the criterion of paying dividends for over 25 years. This long-term pattern of regular dividend payouts underlines the company's financial stability and commitment to returning value to shareholders. Specific dividend payouts fluctuated at times, notably decreasing during the financial crisis of 2008-2009. However, despite difficult economic periods, Comerica resumed its growth in dividends per share. The reliability demonstrated by this historical dividend payment trend is a positive sign for investors seeking steady income, marking a strong trend in Comerica's dividend policy.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases reflect a company's confidence in its own future and help to enhance shareholder value. Evaluating historical repurchase trends helps investors gauge the reliability and financial health of the company over time.

From 2003 to 2023, Comerica has shown a variable approach towards stock repurchases. The years with significant repurchases include 2004, 2005, 2006, 2007, 2008, 2013, 2014, 2015, 2016, 2018, 2019, 2020, 2021, and 2022. The repurchased numbers indicate indices where the share count decreased noticeably year-over-year. It demonstrates a consistent effort by CMA to buy shares back, except during some periods. The average repurchased shares over the last 20 years stand at -1.3023%. This fluctuating but fairly regular repurchasing trend is generally considered a positive sign, signaling sound capital allocation practices by the company. This manifests as a long-term bullish strategy for enhancing shareholder value.