Last update on 2024-06-27

Cooper Companies (COO) - Dividend Analysis (Final Score: 3/8)

An in-depth analysis of Cooper Companies (COO) dividend policy reveals that stability and performance are mediocre, scoring 3 out of 8 based on stringent criteria.

Short Analysis - Dividend Score: 3

We're running Cooper Companies (COO) 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 is the ratio of a company's annual dividend compared to its share price. It's an important criterion because it indicates how much cash flow an investor is getting for each dollar invested in an equity position. A higher dividend yield can make a stock more attractive to investors looking for income.

As of 2023, Cooper Companies (COO) has a dividend yield of 0.0159%, which is substantially lower than the industry average of 0.67%. This is a concerning trend for income-focused investors, as the dividend yield has been on a declining trajectory for the past 20 years, falling from 0.5093% in 2003 to the current level. This decline is even more stark when considering that the industry average has fluctuated but remains significantly higher. Furthermore, despite the stock price of COO seeing significant growth over the period—from $11.78 in 2003 to $94.61 in 2023—the dividend per share has remained relatively stagnant at around $0.06 until falling to $0.015 in 2023. This suggests that the company has not prioritized increasing its dividend payouts in line with its share price appreciation. Hence, for investors relying on dividends for income, this may be seen as an unfavorable trend, despite the robust growth in the company's stock price.

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

Examining the dividend growth rate over a longer period can indicate the company's commitment to returning value to shareholders and its ability to generate consistent profit.

From 2003 to 2023, Cooper Companies (COO) exhibits an average dividend ratio of -3.45%, indicating a negative trend in dividends paid over the past 20 years. Notably, the values showing substantial increases and decreases suggest inconsistent dividend payments. In fact, many years show zero dividends, and there are significant negative deviations (e.g., -25%, -50%, -37.5%, -60%) without corresponding positive trends to balance them. Hence, Cooper Companies' dividend growth rate is not higher than 5% in the last 20 years. This trend is unfavorable as it highlights the company's lack of steady and increasing dividend payments.

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

The Average Payout Ratio measures the proportion of earnings a company pays to its shareholders in the form of dividends. A lower ratio suggests that the company retains more earnings for growth and other investments, important for maintaining long-term sustainability.

Over the last 20 years, the average payout ratio for Cooper Companies (COO) stands at approximately 0.72%, which is significantly below the threshold of 65%. This is a positive indicator as it showcases the company's ability to efficiently manage its retained earnings. Cooper Companies has consistently kept its payout ratio extremely low, with the highest being slightly above 4% and several years even below 1%. The anomalous negative value in 2007 is likely due to net losses that year, which can distort the payout ratio. Overall, this trend is excellent and suggests a disciplined approach to dividend payouts, ensuring adequate reinvestment into the business.

Dividends Well Covered by Earnings?

Explain the criterion for Cooper Companies (COO) and why it is important to consider

Dividends are well covered by the company's earnings. This criterion is significant as it indicates if the company generates sufficient earnings to sustain its dividend payouts. A dividend coverage ratio of at least 2 or more is often considered healthy, meaning the company earns twice as much as it pays out in dividends.

Dividends Well Covered by Cash Flow?

Dividends should be well covered by free cash flow to ensure the company can sustain payouts without compromising its financial health. A dividend coverage ratio above 1 indicates good coverage, while anything below raises concerns.

Analyzing Cooper Companies' data from 2003 to 2023, it's evident that their dividend coverage by free cash flow is consistently below 1, often significantly below. For instance, the highest coverage was in 2006 at 0.34 and even negative in 2007 and 2008 (-0.05 and -0.09, respectively). Positive trends re-emerged post-2012 but remained low. In most years, the coverage ratio hovers dangerously low around 0.01-0.02. These figures suggest that the company has struggled to generate sufficient free cash flow relative to its dividend payments. This could imply potential sustainability issues if no mitigating actions are undertaken. It's a red flag for dividend reliability, demanding cautious observation.

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 of utmost importance for income-seeking investors.

The dividend per share for Cooper Companies (COO) has shown periods of stability but there have been sharp drops in certain years, specifically 2008, 2022, and 2023. The dividend per share dropped in 2008 from 0.06 to 0.03, a 50% decline. Likewise, 2022 saw a drop from 0.06 to 0.0375, and 2023 from 0.0375 to 0.015, both of which are greater than 20%. These fluctuations indicate that Cooper Companies’ dividend payments are not as stable as preferred for income-seeking investors. The reliability of receiving consistent dividend income from COO is therefore questionable.

Dividends Paid for Over 25 Years?

look at if dividends have been consistently paid out for over 25 years and the reliability of the company to sustain payouts

The given data shows that while Cooper Companies (COO) did start paying dividends in 1999, there have been variations in the dividend per share over the years. The values have fluctuated, with some years seeing as low as $0.03 in 2008 and $0.015 in 2023. Despite these fluctuations, the company has managed to pay dividends almost every year for the past 25 years, with 1998 being the only year without dividend data in the set provided. Paying dividends for an extended period, such as 25 years, is generally seen as a sign of financial stability and a commitment to returning value to shareholders. However, consistent dividend amounts are also essential for investors who rely on these payouts. The fluctuation in COO's dividends could be viewed negatively in this light, as it may indicate periods of financial strain or suboptimal capital management. Nonetheless, the long history of paying dividends is a positive trend, even though there is room for improvement in dividend consistency.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Cooper Companies (COO) and why it is important to consider

The number of shares outstanding reflects stock repurchases and issuances by a company. When a company repurchases its shares, it reduces the number of shares outstanding, which can increase earnings per share and possibly bolster the stock price. Evaluating stock repurchase trends over 20 years provides insights into management's commitment to returning value to shareholders and managing capital wisely.