Last update on 2024-06-28

Corteva (CTVA) - Dividend Analysis (Final Score: 5/8)

Corteva (CTVA) dividend analysis based on an 8-criteria scoring system. Learn about its performance, stability, and long-term reliability of dividend policy. Final Score: 5/8.

Short Analysis - Dividend Score: 5

We're running Corteva (CTVA) 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 represents the ratio of a company's annual dividend relative to its share price, indicating the return on investment for shareholders.

Corteva's (CTVA) current dividend yield of 1.2938% is significantly lower than the industry average of 12.48%. According to the provided data, Corteva's dividend yield fluctuated notably over the past years—from non-existent in 2016-2018, it rose to peaks like 2.3502% in 2020, before stabilizing into the range close to 1% since 2021. The discrepancy between Corteva's yield and the industry can be attributed primarily to strong upward stock price movements, closing at $47.92 in 2023 versus $29.56 in 2019. The stock price appreciation would inherently lower the dividend yield, given the relatively modest growth in the dividend per share. While the yield appears low, this trend suggests potential capital gains and a strategic re-investment ethos which could underpin long-term value creation rather than focusing merely on immediate returns via dividends. The context is essential because yield alone doesn't encapsulate total returns for shareholders.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments, which indicates the company's commitment to returning value to shareholders over time.

Corteva (CTVA) has shown a highly inconsistent Dividend Growth Rate over the past years, with fluctuations ranging from -80.5556% to 342.8571%. This variability indicated an average Dividend Ratio of 40.6954%. However, the presence of multiple negative percentages reflects periods when the company likely reduced or did not pay dividends. Given these inconsistencies, it appears that the Dividend Growth Rate is not sufficiently stable and has only sporadically exceeded 5%. Thus, this trend does not necessarily bode well for long-term dividend reliability.

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

A company's average payout ratio lower than 65% indicates its ability to sustainably support dividend payouts over time. It reflects a balance between rewarding shareholders and retaining earnings for growth and stability.

The average payout ratio of Corteva (CTVA) over the specified period is approximately 26.89%, which is well below the critical threshold of 65%. This is a strong indicator that Corteva has been managing its dividend payouts prudently. Historically, maintaining a payout ratio below 65% ensures the business has adequate funds for growth, weathering economic downturns, and capital investments. There are some years with zero payout ratios, which may be attributed to strategic decisions to retain earnings or specific financial circumstances, such as negative earnings. The negative payout in 2019 and the unusually high payout in 2020 may skew short-term perceptions but overall, Corteva displays a conservative and sustainable approach to its dividend policy.

Dividends Well Covered by Earnings?

Explain the criterion for Corteva (CTVA) and why it is important to consider

Dividends are well covered by the earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refer to the company's ability to pay dividends from its operating cash flow. It's important because it shows the sustainability of the dividend payments.

From the data provided, covering the years 2016 to 2023, free cash flow and dividend payout amounts have varied widely for Corteva (CTVA). Here are some notable trends: In 2018, with a negative free cash flow (-1,018M USD) and a dividend payout of 194M USD, Corteva operated at a dividend-to-cash flow ratio of -19% (an unhealthy sign). By 2019, this became worse with free cashflow almost neutral (-93M USD) and payouts soaring to 511M USD, reducing the ratio further to about -549%. This is unsustainable. Positive signs emerged in 2020 and 2021 as free cash flows improved substantially to 1,589M (2020) and 2,154M (2021), increasing dividend coverage ratios to 24% (2020) and 18.4% (2021). Noticeably, in 2022, although free cash flow was reduced again to zero, the company dynamically managed its payout, increasing from the previous years to 418M USD, returning the ratio to a positive standing of 156.5%. In 2023, there was another positive trend with free cash flow turning to 1,174M USD versus a consistent payout post-2021 to 439M USD, yielding a healthier 37.39% dividend coverage. Therefore, there is variability, but the trend edges toward improvement - good indications for Corteva's dividend sustainability.

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 crucial for income-seeking investors. It demonstrates the reliability of a company's cash flow and overall financial health.

The data reveals that Corteva (CTVA) has only paid dividends starting from 2019, thus covering a much shorter period than the required 20 years. Between 2019 and 2023, the company recorded varied dividend payments: starting at $0.26 in 2019 and fluctuating over the years, dropping as low as $0.14 in 2022, but recovering again. This indicates a certain level of volatility, especially with the significant drop from $1.08 in 2021 to $0.14 in 2022, which exceeds a 20% decline. This trend is not ideal for those seeking consistent income, and it indicates a higher degree of uncertainty regarding future dividend stability.

Dividends Paid for Over 25 Years?

Explain the criterion for Corteva (CTVA) and why it is important to consider

Criterion 6 examines whether a company has been able to pay dividends consistently over a period exceeding 25 years. This is crucial as it reflects the company’s stability, profitability, and long-term commitment to returning value to its shareholders. Companies with a history of consistent dividend payments are often seen as lower-risk investments because they likely have a strong financial foundation and a resilient business model.

Reliable Stock Repurchases Over the Past 20 Years?

Interpret the company's record and stability in repurchasing its own shares over the past 20 years.

Corteva (CTVA) has not consistently engaged in stock repurchases over the past 20 years. The data shows no share repurchase activity before 2019. From 2019 onwards, the company has more actively engaged in buybacks, evidenced by the reduction in shares from 749,500,000 in 2019 to 709,000,000 in 2023. The average repurchase rate of -0.5483 suggests a moderate share reduction annually, a trend that generally indicates return of value to shareholders. However, the corporation’s recent entry into consistent buybacks highlights a positive shift but does not yet firmly establish long-term reliability.