Last update on 2024-06-27

Deutz (DEZ.DE) - Dividend Analysis (Final Score: 4/8)

Deutz (DEZ.DE) dividend policy rated 4/8 on an 8-criteria scoring system. Detailed assessment of performance, stability, and historical dividend payout trends.

Short Analysis - Dividend Score: 4

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

The analysis evaluates Deutz (DEZ.DE) against an 8-criteria system to ascertain the performance and stability of its dividend policy. Deutz achieved a total score of 4 out of 8. Here are the key takeaways: \n\n1. **Dividend Yield**: Deutz's current dividend yield of 3.125% is significantly higher than the industry average of 1.57%, appealing to dividend-focused investors.\n\n2. **Dividend Growth Rate**: The company has failed to grow its dividends at an average annual rate above 5% in the last 20 years, marked by several years of non-payment and reductions in dividends, reflecting inconsistent dividend growth.\n\n3. **Payout Ratio**: Deutz maintained a low average payout ratio of 2.5%, indicating extreme prudence in its dividend policy, but this could limit immediate returns for investors.\n\n4. **Earnings Coverage**: Fluctuating earnings led to inconsistent dividend coverage, posing a risk for investors seeking reliable dividend income.\n\n5. **Cash Flow Coverage**: Although Deutz had notable spikes in dividend coverage by cash flow, the overall consistency is lacking, questioning the reliability of dividends.\n\n6. **Dividend Stability**: Deutz has not been able to deliver stable dividends. There have been multiple years of zero dividend payments, thus failing to provide the necessary reliability for income-seeking investors.\n\n7. **25-Year History**: The company has paid dividends only in 11 out of the past 22 years, falling short of the 25-year consecutive dividend payment criterion, indicating instability.\n\n8. **Stock Repurchases**: Infrequent stock repurchasing activities were noted, indicating inconsistent value creation through buybacks.

Insights for Value Investors Seeking Stable Income

Given the comprehensive assessment of Deutz's dividend stability and reliability, it is recommended to approach this stock with caution if your primary goal is steady and reliable dividend income. The company's inconsistent dividend history, coupled with fluctuating earnings and low payout ratios, suggests that Deutz may not be the best option for investors looking for regular and dependable dividend returns. However, if occasional higher yields and potential capital appreciation are acceptable, it might be worth a closer look.

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 measures the annual dividend payment relative to the stock's price and is crucial for income-focused investors.

Deutz's current dividend yield of 3.125% stands significantly higher against the industry average of 1.57%, making it attractive for dividend-focused investors. Over the last 20 years, Deutz has had fluctuating dividend yields, with spikes in certain years, such as 2008 (8.4034%) and recent highs in 2022 (3.7037%). Despite some years of zero dividend yield, the recent trend shows robust improvement. Higher current yield indicates better returns to investors compared to the broader industry.

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

Dividend Growth Rate indicates the annualized percentage growth of a company's dividend. It showcases the company's commitment to returning value to shareholders over the years.

Analyzing Deutz's (DEZ.DE) dividend data from 2003 to 2023, we observe that the dividend per share has experienced inconsistency, with several years at zero (2003-2015, 2018, 2020-2023) and some negative values (-100 in 2009 and -100 in 2021) indicating dividend cuts or removals. The Average Dividend Ratio over this period is approximately -4.08%, signifying that the company has not only failed to grow its dividends by more than 5% annually but also faced issues in consistently maintaining or increasing dividend payouts. This reflects poorly on the company's financial stability and commitment to returning value to shareholders, making this trend unfavorable for potential dividend investors.

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

A payout ratio measures the proportion of earnings a company distributes to its shareholders as dividends. A lower payout ratio (typically below 65%) is generally considered sustainable and suggests a company is reinvesting enough in its business for growth while maintaining adequate dividend payments.

Upon evaluating Deutz's (DEZ.DE) payout ratio data over the past 20 years, it is clear that the average payout ratio is extremely low at approximately 2.5%. The data reveals several years with no dividend payouts (notably periods such as 2003–2007, 2009–2011, and 2021) and instances of negative payout ratios in 2008 and 2020. Only a few notable dividend payouts occurred during this 20-year span, with significant anomalies recorded in 2014 and 2015 (156.6% and 50.98%, respectively). The majority of the years showcased a very conservative approach to dividends, reflecting a priority on retaining earnings for business operations or perhaps facing financial constraints that limited dividend distributions. Overall, this trend indicates disciplined financial management, which may suggest sustainability in the company's operational strategies but at the potential cost of lower immediate returns for shareholders.

Dividends Well Covered by Earnings?

This criterion assesses the company's ability to cover its dividends with its earnings, which is important to assure investors that the company can sustain its dividend payouts.

Based on the provided data from Deutz (DEZ.DE), there have been significant fluctuations in earnings per share (EPS) and corresponding dividend per share over the years. For instance, the EPS was negative in several years, such as -0.0687 in 2008, -1.026 in 2009, and -0.8903 in 2020, disallowing the company from paying dividends in those periods (dividend cover value 0). Conversely, in profitable years like 2017 with an EPS of 1.0028 and 2022 with 0.6557, Deutz has paid dividends, though the dividend cover shows varied results, with 0.226 in 2022 suggesting a careful approach towards dividend payouts relative to earnings. It suggests an inconsistency in maintaining strong earnings to support dividends yet attempts sustainability in payout due to fluctuating market conditions and their impact on earnings. This trend could be viewed as a risk factor for dividend-seeking investors due to prosperous periods being equally met with downturn periods affecting dividend reliability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

The coverage of dividends by cash flow has varied greatly for Deutz (DEZ.DE) over the past two decades. A coverage ratio above 1 indicates that the company generates enough free cash flow to cover its dividend payments. From 2003 to 2008, the company did not issue dividends. Notably, in 2009, while dividends were paid, the free cash flow was negative. Coverage significantly improved over the years, with a notable spike in 2022, where the ratio hit 10.11 due to an exceptionally high free cash flow driven by improved operational efficiency or extraordinary events. However, there were years like 2016 and 2018 where the coverage ratio was less than 1, indicating payouts were higher than free cash flow. The volatile nature of the coverage ratios suggests that while there have been good years, the consistency in covering dividends from free cash flow has been lacking. This trend may be concerning for dividend reliability, especially if past positive spikes were driven by one-off events rather than sustainable operations.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years emphasize the company's ability to generate consistent cash flow and manage finances effectively. It reassures income-seeking investors that they can rely on the company for regular income with less volatility, which is particularly important for long-term investment planning.

The scrutiny of Deutz (DEZ.DE)'s dividends per share over the last 20 years reveals several concerning trends. Before 2008, the company did not pay any dividends. While they initiated a 0.2 EUR dividend in 2008, it was suspended again in subsequent years, up until 2014, when a 0.07 EUR dividend commenced. However, Deutz's dividends have not demonstrated substantial stability; for instance, there was a complete absence of dividends in some years, such as 2009, 2010, 2011, and 2013. Moreover, dividends did not drop by more than 20%, but their absence from year to year indicates a high level of inconsistency. For income-seeking investors, this inconsistency suggests that Deutz currently does not offer the level of reliability necessary for those planning to depend on dividends for steady income. Furthermore, the resumption and subsequent consistent payout of 0.15 EUR since 2018 does little to negate the previous erratic history. This trend is bad for Deutz in satisfying criterion 4 for stable dividends.

Dividends Paid for Over 25 Years?

Condition: Has the company consecutively paid dividends for at least 25 years? It is crucial as it indicates long-term financial stability and consistent value return to shareholders.

Based on the provided data, Deutz (DEZ.DE) does not consistently meet the criterion of having paid dividends for over 25 years. The company started paying dividends in 2008 but has missed several years in between, including recent gaps such as 2021. Consistent dividend payment history is a key indicator of the company’s financial health and commitment to returning value to shareholders. In this case, Deutz falls short, demonstrating a potentially unstable history of profitability and cash flow management, which can be concerning for both present and prospective investors. The data shows that only in 11 out of 22 years was a dividend actually paid, with several gaps, which makes this trend unfavourable for long-term investors seeking reliable passive income.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

The number of shares for Deutz (DEZ.DE) shows significant fluctuations. The number of shares decreased in the years 2009, 2017, and 2019, indicating stock repurchases in these specific years. However, an overall increasing trend in shares, particularly a notable rise in 2022, suggests that the company has not consistently executed stock repurchases over the long term. The average repurchase rate of 2.7563 over 20 years is relatively low, implying infrequent buybacks. This sporadic repurchasing activity may signal poor capital allocation and can be perceived as a negative trend for shareholders seeking consistent value creation through buybacks.