Last update on 2024-06-27

Deutsche Boerse (DB1.DE) - Dividend Analysis (Final Score: 4/8)

Analyze Deutsche Boerse's (DB1.DE) 20-year dividend performance, covering payout ratios, growth rates, and sustainability. Final Dividend Score: 4/8.

Short Analysis - Dividend Score: 4

We're running Deutsche Boerse (DB1.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Deutsche Boerse (DB1.DE) uses 8 criteria to assess its dividend policy's performance and stability. The overall score is 4 out of 8. Here are some key points: 1. **Dividend Yield:** Deutsche Boerse's yield of 1.9303% is below the industry average of 2.13%. 2. **Growth Rate:** The average growth rate is 16.91%, but it has fluctuated, including several years of no growth. 3. **Payout Ratio:** Averaging 49.73%, this is below the 65% threshold, indicating a conservative payout approach. 4. **Earnings Coverage:** Generally positive, with earnings covering dividends well in most years. 5. **Cash Flow Coverage:** Inconsistent coverage by free cash flow, which may concern long-term investors. 6. **Dividend Stability:** Stable with a single significant drop in 2008 but generally growing since 2010. 7. **Long-term Payment:** Not a continuous 25-year history, but consistent since 2003. 8. **Stock Repurchases:** An average of roughly 4 times in the past 20 years, showing selective but disciplined buybacks.

Insights for Value Investors Seeking Stable Income

Overall, Deutsche Boerse shows a mixed bag in terms of dividend stability and performance. Although its yield is below the industry average, the growth rate is high, and the payout ratio is conservative. The inconsistency in cash flow coverage and the lack of a 25-year payout history might raise some flags. However, its stable dividend since 2003 and disciplined stock repurchases are positive signs. If you're really keen on stable dividends and conservative growth, this might be worth looking into, but there are some concerns that need close monitoring.

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 compared to its share price, and it's a critical metric for income-focused investors.

Deutsche Boerse's dividend yield of 1.9303% is slightly below the industry average of 2.13%, indicating that it lags behind its peers in terms of immediate dividend income. Over the last 20 years, Deutsche Boerse has shown a fluctuating trend in dividend yield, peaking at 4.9773% in 2012 before gradually decreasing to levels below the industry average. With the highest dividend yield recorded in 2012, it is noticeable that the value has been on a decline, reflecting either an increase in the stock price or a lack of substantial increase in dividends disbursed per share. Given the current yield, Deutsche Boerse may not be as attractive to investors primarily looking for high dividend returns, but it may still appeal to those confident in the company's growth prospects and potential for capital appreciation.

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

The dividend growth rate measures the compound annual growth rate (CAGR) of a company's dividend payments over a specified period. It is important because it shows a company's ability to increase its dividend over time, reflecting its financial health and profitability.

Deutsche Boerse's dividend per share ratio over the last 20 years exhibits substantial variability, with an average growth rate of approximately 16.91%. While this figure is significantly above the 5% threshold, the inconsistency in annual growth rates, including negative and zero-growth years, signals potential instability. Despite impressive average growth, the presence of negative and zero increment years could concern conservative investors prioritizing consistent dividend growth.

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

The average payout ratio measures what portion of earnings a company is distributing as dividends to its shareholders. A lower ratio indicates a conservative approach and potential for growth.

The payout ratio for Deutsche Boerse (DB1.DE) over the last 20 years averages at approximately 49.73%, which is significantly below the 65% threshold. This indicates a conservative approach in dividend payments and suggests that the company retains a substantial portion of its earnings to reinvest in growth opportunities. Despite some fluctuations, particularly in 2007 (72.14%) and 2009 (82.94%), the overall trend demonstrates financial prudence. This is a positive sign for investors, showing sustained capability in maintaining dividends while also preserving capital for future expansions.

Dividends Well Covered by Earnings?

Dividends must be adequately covered by earnings to ensure sustainability and indicate the company's financial health.

Analyzing the historical data for Deutsche Boerse (DB1.DE), we see that the Earnings per Share (EPS) have demonstrated significant growth since 2003, from €2.203 to €9.3544 in 2023. On the other hand, the Dividend per Share (DPS) shows a less volatile yet steady growth, starting at €0.44 in 2003 and reaching €3.6 in 2023. However, the ratio of dividends covered by earnings, calculated by dividing DPS by EPS, reveals some concerns. The ratio has remained below 1, except for a few years, suggesting that in most cases, the dividends are well covered by the earnings. Post-2017, the ratio has huddled closer to the 0.4 region, meaning earnings cover slightly more than twice the amount of dividends paid. This trend is generally positive but requires close monitoring, as relatively lower coverage ratios could indicate pressure if earnings decline. A sustainable dividend policy often suggests strong management discipline, albeit Deutsche Boerse should ensure it maintains or improves earnings to comfortably cover growing dividends.

Dividends Well Covered by Cash Flow?

Covering dividends with cash flow assesses a company's ability to pay dividends from its operating cash flow. It’s an important measure of dividend sustainability.

Deutsche Boerse's free cash flow has shown some volatility over the years, ranging from a significant negative free cash flow in 2015 to a peak in 2022. Similarly, the coverage ratio of dividends with cash flow varies widely. For instance, in 2015, the coverage ratio plummeted into negative territory indicating free cash flow was insufficient even to cover operating needs, let alone pay dividends. Impressive years like 2021 and 2022 with coverage ratios of 0.784 and 0.272 respectively still indicate the challenge in consistently sustaining dividends from cash flow alone. In 2012, the coverage ratio exceeded 1, suggesting that dividends were well covered by cash flows, an anomaly rather than the norm. Generally, the trend suggests a somewhat worrying inconsistency in dividend coverage, which might be a red flag for long-term dividend investors.

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. It showcases the company's consistent profitability, positive cash flows, and strong commitment to returning profits to shareholders. A stable dividend track record is often seen as a proxy for financial health and reliability.

Examining the dividend per share data for Deutsche Boerse (DB1.DE) over the last 20 years, we observe several important points. In 2006, the dividend increased significantly to €2.1 from €0.7 in 2005. A further comparison between 2007 (€3.4 per share) and 2008 (€2.1 per share) suggests a decrease of about 38%. This drop, however, only happened once in this 20-year timeframe. Following this event, the dividend per share has exhibited remarkable stability and growth, marking increases almost every year from 2012 to 2022, with no drops observed. For the detailed trend: In 2023, the dividend per share is at €3.6, up from €3.2 in 2022. Despite the one-time decrease in 2008, the overall trend of Deutsche Boerse’s dividends exhibits consistency, with even incremental increases post-2010. This robust stability is appealing for income-seeking investors, and the trend looks commendably good for those focusing on long-term assured returns.

Dividends Paid for Over 25 Years?

When evaluating a company's dividend history, it’s crucial to see if it has consistently paid dividends for over 25 years. This demonstrates stability and reliability in returning capital to shareholders, which can be important for income-focused investors.

Deutsche Boerse (DB1.DE) has a mixed dividend payment history. It did not pay any dividends in the first few years (1999, 2000, and 2002), but has established a more consistent dividend-paying record since 2003. Notable increments can be seen over the years, particularly post-2003 except for a discrepancy in 2008 during the global financial crisis. From 2006 onwards, dividends per share have shown a more consistent and growing trend, reaching €3.6 in 2023. This pattern reflects the company's growing profitability and commitment to its shareholders in terms of regular dividend payments. However, the absence of dividends in the initial years means it hasn’t maintained a dividend-working streak for over 25 years, which is something investors might need to bear in mind when analyzing its long-term dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over an extended period, like 20 years, can signal that a company is efficiently utilizing its excess cash to return value to shareholders. Regular repurchases often indicate robust financial health and confidence in the company's future performance by its management. It also reduces the number of shares outstanding, potentially increasing earnings per share (EPS) and providing a cushion during market downturns by showing consistent support for the stock price.

Over the past 20 years, Deutsche Boerse has shown periods of active stock repurchases. The years identified for reliable repurchases include 2005, 2006, 2008, 2009, 2011, 2013, 2018, and 2019. On average, the company has repurchased shares approximately 4.03 times over the 20-year period. This trend indicates a disciplined approach to capital allocation, potentially providing consistent returns to shareholders. However, the repurchase activity is not continuous yearly, reflecting a more nuanced strategy that likely considers market conditions and internal financial status. This selective approach can be viewed positively as it suggests that the company is evaluating the optimal timing for buybacks rather than engaging in them blindly. Therefore, while the frequency of repurchases shows a positive trend, its value as a reliable metric should be assessed alongside other financial health indicators.