Last update on 2024-06-27

DuPont de Nemours (DD) - Dividend Analysis (Final Score: 3/8)

DuPont de Nemours (DD) Dividend Analysis detailed assessment based on 8 criteria: performance, stability, and sustainability with a final score of 3/8.

Short Analysis - Dividend Score: 3

We're running DuPont de Nemours (DD) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

DuPont de Nemours (DD) was evaluated on their dividend performance based on an 8-criteria system and scored 3 points. Key findings include: 1. Dividend yield (1.8718%) is below industry average (2.37%), showing recent downward trends, impacting attractiveness for income-focused investors. 2. Average Dividend Growth Rate is 4.8645%, failing to meet the 5% threshold, indicating inconsistency and potential financial instability. 3. Payout ratio averages 60.17%, meeting the target but showing high volatility. 4. Dividend coverage by earnings is mixed, with strong coverage in certain years and weaker or negative coverage in others, including 2020. 5. Dividend coverage by cash flow is concerning with recent negative ratios. 6. Dividend stability is compromised by substantial declines post-2008 and post-2017. 7. Dividends paid consistently for over 26 years but showed significant drops during the financial crisis. 8. Stock repurchases have shown mixed reliability, with frequent recent repurchases but lower historical trends.

Insights for Value Investors Seeking Stable Income

Considering the mixed performance on the 8-criteria dividend evaluation, DuPont de Nemours (DD) has both strengths and weaknesses in its dividend policy. The payout ratio and long-term commitment to paying dividends are positives, but the inconsistencies in dividend growth, yield, and dividend coverage by cash flow and earnings are concerning. Potential investors should proceed with caution and consider diversifying or looking for more stable dividend stocks if income reliability is a priority. Comprehensive financial health and dividend history reviews are essential before making an investment decision.

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 annual dividend payment to shareholders expressed as a percentage of the stock price.

DuPont de Nemours (DD) has a current dividend yield of 1.8718%, which is lower than the industry average of 2.37%. Examining the dividend yield over the past 20 years shows significant fluctuation, with notable peaks in 2008 (11.1332%), 2015 (6.1386%), and 2016 (6.778%). The recent years indicate a downward trend, rendering the yield less attractive currently. Historically high yields might have been influenced by drastic drops in stock prices in those periods. A lower yield compared to the industry average suggests that the stock might be less attractive to income-focused investors at the moment. However, it's essential to also consider the sustainability of the dividends and the company's overall financial health when making an investment decision.

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

The Dividend Growth Rate over the last 20 years

The given Dividend Ratio dataset demonstrates significant volatility, with multiple years showing zero or negative values and irregular spikes. Since 2003, the company's dividends have ranged unpredictably from substantial negative values (e.g., -64.2848 in 2009) to erratic positives (e.g., 106.5485 in 2015). The average dividend growth rate stands at a meager 4.8645%, falling short of the desired 5% mark. Such inconsistency points to financial instability or external disruptions affecting dividend policies. Therefore, the trend indicates an overall negative trend due to its failure to exceed the threshold consistently.

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

The average payout ratio is the percentage of earnings paid to shareholders in dividends, which indicates how sustainable the dividend payments are.

For DuPont de Nemours (DD), the average payout ratio over the past 20 years is approximately 60.17%. The target of having the average payout ratio below 65% is met. This trend is generally good, as a lower payout ratio indicates the company is retaining more earnings for reinvestment and future growth, which suggests better long-term financial health. However, it is important to note the significant variability in DD’s payout ratios, including extreme spikes observed in some years like 2008 (129.26%), 2017 (192.64%), 2019 (344.67%), 2022 (153.15%), and the negative value in 2020 (-29.91%). Such volatility can indicate a higher risk scenario for sustained dividends. Overall, while the average payout ratio meets the criterion, the underlying volatility suggests a need for cautious optimism.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

The ratio of Earnings per Share (EPS) to dividends per share indicates how well dividends are covered by the earnings. Higher values mean better coverage. The historical trend for DuPont de Nemours shows fluctuations in coverage. Periods like 2007-2009 and 2020 exhibit weaker coverage or negative coverage ratios. However, years like 2003, 2005, and 2023 have stronger coverages suggesting that in those particular years, earnings were well sufficient to cover dividend payouts. In 2020, there was a negative coverage ratio, highlighting that DuPont de Nemours had more paid in dividends than it earned, which is particularly concerning.

Dividends Well Covered by Cash Flow?

Dividends being well covered by cash flow indicates that a company can comfortably meet its dividend payments from the cash it generates. This demonstrates financial stability and assures investors of the sustainability of dividends.

Between 2003 and 2018, DuPont de Nemours exhibited varying degrees of dividend coverage by free cash flow, mostly positive but with significant swings. For instance, in 2017, there was a healthy coverage ratio of 0.678, indicating more than 67.8% of free cash flow was allocated to dividends. However, from 2019 onwards, the company faced larger negative coverage ratios such as -1.270 in 2019 and -8.811 in 2022, signaling insufficient cash flow to cover dividends. The negative coverage in recent years is concerning and raises questions about dividend sustainability and financial health.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are important because they provide income-seeking investors with confidence in the predictability of their returns. Companies that can maintain or grow their dividends tend to reflect better financial health and management practices.

Upon examining DuPont de Nemours' (DD) dividend per share from 2003 to 2023, the dividend amount does exhibit some erratic behavior, particularly with substantial drops post-2008 to 2010 and post-2017 to 2020. For instance, after maintaining a relatively stable rate throughout the early 2000s, the dividend per share substantially fell in 2009 to $0.854 from $2.3911 in 2008—over a 60% drop. Additionally, a declining trend emerged once more between 2016 and 2020, where the dividend per share reduced from $4.56 in 2018 to $1.2 in 2020, marking a close to 70% drop. Although these significant declines exceed a 20% drop threshold, they appear at specific intervals rather than consistently. This fluctuation points to underlying external economic factors or business restructures affecting the payouts. Such instability could be considered detrimental for income-focused investors seeking predictable and stable returns, despite no new 20% drop recently from 2020 onwards.

Dividends Paid for Over 25 Years?

Examine whether the company has paid dividends consistently for over 25 years to evaluate its stability and shareholder commitment.

DuPont de Nemours (DD) has shown a commitment to paying dividends over the past 26 years, with dividends per share being paid each year from 1998 to 2023. However, it's important to notice a significant drop during 2009, where dividends fell to $0.854 from previous years' $2.3911, indicating a potential financial stressor during the 2008 financial crisis. Despite this, the firm rebounded with a trend of increasing dividends post-crisis, peaking with $5.52 in 2016, showcasing its resilience. While the company consistently paid dividends, maintaining dividend stability and growth post-crisis points toward a solid commitment to returning capital to shareholders. This demonstrates a relatively strong but not entirely unblemished track record, indicating overall good financial health with a commitment to dividends, albeit with fluctuations.

Reliable Stock Repurchases Over the Past 20 Years?

Criterion for DuPont de Nemours (DD): Reliable Stock Repurchases Over the Past 20 Years

Over the examined 20-year period, DuPont de Nemours started with 308.7 million shares in 2003, reaching 449.9 million shares by 2023. Notably, despite significant fluctuations, repurchases occurred in 10 of these years including 2006-2008, 2014, 2016, and consecutively from 2019 to 2023—a reflection of consistency in recent years. However, the overall average repurchase frequency of 3 times in 20 years is moderately low, indicating that while recent practices are reliable, historical trend wasn't—this reveals a mixed reliability in their repurchase strategies.