Last update on 2024-06-27

Campbell Soup (CPB) - Dividend Analysis (Final Score: 7/8)

Assess Campbell Soup (CPB)'s dividend performance with a detailed 8-criteria analysis. Stable, high-yield dividends make CPB a strong income investment.

Short Analysis - Dividend Score: 7

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

Campbell Soup's dividend policy performance and stability were assessed using an 8-criteria scoring system, where it earned a solid score of 7. The company's dividend yield of 3.4235% is significantly higher than the industry average, indicating strong returns for shareholders. Over the past 20 years, the company has shown a positive, albeit variable, trend in dividend growth, with an average annual growth rate of 8.16%. Campbell Soup has managed a sustainable average payout ratio of 60.93%, though some years showed risky spikes. Dividends are mostly well-covered by earnings and cash flow, despite occasional concerns. Stability is also highlighted by 25 years of consistent dividend payments and reliable stock repurchases, which indicate strong shareholder commitment. Historically, the company maintained stable dividends even during economic downturns. However, investors should be cautious of occasional instabilities in growth rates, payout ratios, and cash flow coverage.

Insights for Value Investors Seeking Stable Income

Overall, Campbell Soup (CPB) appears to be a reliable choice for income-seeking investors due to its strong dividend yield, consistent payment history, and positive growth rates. The occasional fluctuations in payout ratios and cash flow coverage are areas to watch, but the long record of dividend payments and stock repurchases provide some reassurance of the company's commitment to shareholder value. Therefore, it would be worthwhile for investors to consider CPB as part of a diversified portfolio, keeping an eye on its financial performance and market conditions.

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 a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It's important because it reflects the return on investment for shareholders and indicates the company's capacity to distribute profits.

Campbell Soup's (CPB) current dividend yield of 3.4235% is notably higher than the industry average of 1.77%. Looking at the data over the past 20 years, CPB's dividend yield has frequently been above the industry average. For instance, in 2018, CPB reached a dividend yield of 4.2437% compared to the industry average of 1.89%. This sustained above-average performance suggests that CPB not only has a strong ability to return value to shareholders through dividends but is also stabilizing as a dependable income-producing investment. Stocks with higher than average dividend yields can be attractive, especially in times of economic uncertainty. However, the dip to 1.3909% in 2013 indicates potential volatility in yield, which investors should also factor into their decision making. Overall, the trend is positive for income-seeking investors, indicating a good performance.

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

The Dividend Growth Rate measures how much a company's dividend payments have increased over time, which reflects its financial health and commitment to returning value to shareholders.

Based on the provided numbers, Campbell Soup (CPB) demonstrates an average Dividend Growth Rate of 8.16% over the last 20 years. This indicates that the company has been relatively consistent in increasing its dividend payouts. However, it's important to note the high variability and occasional negative values in certain years. For instance, the significant drops in 2003 (-20%), 2013 (-58.48%), and 2015 (-20%) raise some concerns. Despite these fluctuations, the general upward trend is a positive sign, demonstrating the company's profitable business operations and shareholder-friendly policies. Thus, from a long-term perspective, the dividend growth trend appears to be sound and beneficial for investors, although they should stay alert to occasional dips.

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

The average payout ratio measures the percentage of earnings distributed to shareholders in the form of dividends.

Over the last 20 years, Campbell Soup (CPB) has maintained an average payout ratio of roughly 60.93%. Given the stability suggested by this figure, falling below the critical threshold of 65%, it indicates a sustainable and prudent approach to dividend payments. However, noteworthy spikes occurred in 2016 (over 90%), 2017 (above 160%), and 2018 (nearly 200%), potentially flagging years of either anomalously low net income or extraordinary payouts. Falling back to 60.93% on average illustrates a healthier trend, supporting robust dividend policy adherence, thus stabilizing future earnings distribution. This is favorable.

Dividends Well Covered by Earnings?

Dividends are typically considered well-covered when the payout ratio (dividends-to-earnings) is low, meaning the company earns significantly more than it pays out.

In analyzing Campbell Soup's historical data from 2003 to 2023, the ratio of dividends to earnings per share ranges widely. Generally, a payout ratio under 0.5 (or 50%) is considered healthy, indicating that the company retains ample earnings for growth or debt repayment. In many years, Campbell Soup maintains a payout ratio below 50%, such as in 2003 (0.437), 2004 (0.418), 2005 (0.409), and more recently in 2022 (0.588) and 2023 (0.516). However, there are periods, notably in 2018 (1.620) and 2019 (1.997), where dividends significantly exceed earnings. Such high payout ratios could be risky, signaling potential cash flow issues or over-distribution of profits. On balance, the generally low payout ratios indicate Campbell Soup mostly maintains good coverage of dividends by earnings, although there are notable exceptions requiring caution.

Dividends Well Covered by Cash Flow?

Dividends well-covered by cash flow indicate a company's ability to sustain its dividend payments from its operating activities without resorting to debt or dipping into cash reserves. It's a critical factor for long-term dividend stability.

Analyzing Campbell Soup's (CPB) cash flow coverage of dividends over two decades, we notice fluctuating trends. The ratio of free cash flow to dividend payout ranges from 0.318 in 2006 to 0.905 in 2007. A higher ratio signifies that free cash flow greatly exceeds the dividends paid, ensuring sustainability and potential for growth. While years like 2007 and 2008 were strong, there's been a general fluctuating trend. Lately, from 2020-2023, the ratio averages around 0.48, showing that around half of the cash flow covers dividends. This decline compared to earlier years suggests potential concerns if it remains below 1 consistently. Investors should closely monitor these ratios to understand CPB's dividend sustainability better.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, indicate financial health and reliability.

Over the past 20 years, Campbell Soup Company (CPB) has shown remarkable consistency in its dividend payments. Examining the provided data, we observe that even during economic downturns, CPB maintained and often increased its dividend per share. Although there was a slight dip in 2010 (0.602) and fluctuations thereafter, a drop by more than 20% was never realized: the company recovered swiftly. For example, 2023's dividend per share remains steady at 1.48, similar to previous years. This consistent performance is excellent for income-seeking investors looking for stability. Therefore, the trend is good for those valuing predictable income.

Dividends Paid for Over 25 Years?

Dividends paid consistently over a period of at least 25 years is a crucial indicator of a company's financial stability and shareholder-friendly policies. This consistency not only demonstrates the company’s ability to generate steady cash flows but also its commitment to returning value to shareholders. Continuous dividend payments can also be a positive signal to potential investors about the reliability and long-term viability of the company's business model.

The data shows that Campbell Soup (CPB) has consistently paid dividends for the past 25 years, from 1998 to 2023. The dividend per share has varied over the years, ranging from a high of 3.161 in 1998 to a more stabilized figure around 1.48 in recent years. However, this long track record indicates financial stability and a strong commitment to shareholder value. This is a positive trend for investors seeking reliable income. The only caution here is the decline and stabilization in the dividend amount since the early 2000s which might need further investigation concerning the company's growth strategy and profitability.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Campbell Soup (CPB) and why it is important to consider

The number of shares repurchased over time is a critical indicator of a company's commitment to returning value to shareholders. A steady or increasing trend of stock repurchases can reflect positively on a company's financial health and confidence in its own future prospects.