Last update on 2024-06-27

Deutsche Wohnen (DWNI.DE) - Dividend Analysis (Final Score: 2/8)

Comprehensive dividend analysis of Deutsche Wohnen (DWNI.DE), scoring 2/8 on performance and stability. Explore dividend yields, payout ratios, growth rates, and more.

Short Analysis - Dividend Score: 2

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

Deutsche Wohnen has a low dividend score of 2 based on an 8-criteria analysis. The company's dividend yield is significantly below the industry average, averaging 0.1671%. The dividend growth rate has been highly inconsistent with an average rate of -4.5163%. The average payout ratio stands at an unsustainable 179.97%. The dividends are not well covered by earnings or cash flow. The company has a history of unstable dividend payments with substantial fluctuations and gaps. It has not paid consistent dividends for 25 years, starting only in 2006. Stock repurchases have also been inconsistent over the past two decades. Overall, the criteria point to unstable and lackluster dividend policies and financial health.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Deutsche Wohnen's dividend performance and stability seem problematic, especially for income-focused investors. The low dividend yield, inconsistent growth, unsustainable payout ratios, and poor coverage by earnings and cash flows indicate high risks. The historical instability in dividend payments and inconsistent share repurchases also raise concerns. It might be best to look for other investment opportunities with more stable and reliable dividend policies.

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, expressed as a percentage. It is an important metric for income-focused investors as it provides a measure of the income generated from an investment relative to its cost. A higher dividend yield can indicate an undervalued stock or a high dividend payout. However, it's crucial to compare it within the industry context to judge its appropriateness.

Deutsche Wohnen's current dividend yield of 0.1671% falls significantly below the industry average of 2.99%. While this might raise concerns for income-focused investors, it's essential to consider the historical trends to understand better. Over the last 20 years, the company's dividend yield has seen peaks—most notably in 2006 (38.3305%) and 2007 (8.0478%)—followed by a more steady trend around the 1-2% mark until 2021. The sharp decline in the last two years to below 0.5% begs the question of whether this drop is indicative of internal issues or broader industry trends. A factor to consider here is Deutsche Wohnen's stock price movement, which saw a notable increase over the years, peaking at €43.69 in 2021 before dropping to €23.94 in 2023. Despite a consistent dividend per share ranging between€0.2 to €1.03 from 2011 to 2021, the ratio of dividend payout compared to the stock price (dividend yield) hasn't kept pace, indicating that perhaps the company invested more in capital appreciation. In summary, while a 0.1671% dividend yield is much below the industry average and historically unimpressive, it's part of a broader strategic approach that likely emphasizes stock value growth over regular income payouts for shareholders.

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

The Dividend Growth Rate criterion examines whether Deutsche Wohnen's dividends have grown by an average rate of more than 5% annually over the last 20 years.

The Dividend Ratio data over the past 20 years for Deutsche Wohnen (DWNI.DE) shows highly inconsistent and volatile trends. Many years reflect a 0% dividend payout, while some years exhibit drastically negative values (e.g., 2007: -90.8619%, 2008: -100%). Only a few isolated years have positive growth rates, such as 2012 with 15% and 2014 with 61.9048%. The calculated average dividend ratio stands at -4.5163%, which is well below the 5% growth rate threshold. Hence, the growth rate criteria is failed, indicating that DWNI.DE has not been able to consistently grow its dividends by more than 5% over the last 20 years. This unstable and generally poor trend is not favorable for income-focused investors looking for a reliable dividend growth profile.

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

The Average Payout Ratio criterion is an important measure of dividend sustainability. A ratio below or around 65% is considered ideal, indicating the company is not over-distributing its earnings, leaving sufficient funds for growth and unforeseen expenses.

The average payout ratio of Deutsche Wohnen (DWNI.DE) over the past 20 years stands at an exceedingly high 179.97%. The data also reveals extreme volatility, with values ranging from a negative payout ratio in recent years (-3.6576 and -0.5886 in 2021 and 2022, respectively) to extraordinarily high figures like 3401.6249% in 2006. Notable, though, is the stabilization around reasonable ratios during the 2010-2019 period, averaging below 30%. Nevertheless, the overly high and fluctuating payout ratio averages indicate a potentially unsustainable dividend policy, which poses risks to long-term investors depending on dividend reliability. Therefore, this trend is considered bad for the dividend stability and long-term financial health of Deutsche Wohnen.

Dividends Well Covered by Earnings?

The criterion examines whether Deutsche Wohnen's dividends are adequately supported by its earnings. This is important as it reflects financial stability and sustainability.

Deutsche Wohnen's Earnings per Share (EPS) from 2003 to 2023 show a fluctuating trend, with notable peaks such as 2015 (€3.6195), 2016 (€4.2707), and 2017 (€4.6444), but serious declines in recent years, particularly -€1.0936 in 2022 and -€6.7961 in 2023. The Dividend per Share (DPS), in turn, shows modest but stable growth, except significant peculiarities such as the €9.63 dividend in 2006. However, the ratio of EPS covering DPS demonstrates that in many years, dividends seem inadequately covered by earnings, such as -0.036 in 2022 and -0.056 in 2023. The declining trend in recent years is concerning, indicating that dividends are being paid from sources other than earnings, which is unsustainable in the long run. This trend is poor from a dividend sustainability perspective.

Dividends Well Covered by Cash Flow?

A company's dividends must be well covered by cash flow to ensure sustainability. This measure indicates how many times over dividends are paid from free cash flow, which is vital for financial stability.

Reviewing Deutsche Wohnen's data, several concerning trends arise. For numerous years, free cash flow has either been negative or insufficient to cover dividends, especially from 2003 to 2011 and periodically afterwards. For instance, in 2022, free cash flow was €364.9 million while dividend payout was €15.9 million, giving a coverage ratio of 0.0436, indicating strains on financial health. Positively, 2020 showed better performance with coverage of 0.6196; however, the sporadic nature of sufficient coverage poses risks. This inconsistency in covering dividends with cash flow signals a bad trend, underscoring the need for steady, substantial free cash generation.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are a cornerstone of a reliable income stream for investors, and any significant fluctuation can indicate business instability or financial issues.

Analyzing Deutsche Wohnen's dividend per share over the past 20 years, the most striking observation is the substantial drop followed by periods of no dividends after the payment in 2006. Starting in 2007, there were no dividends for several years until 2011, when a normalized pattern began to emerge with smaller, incremental increases. The dividend remained stable with minor fluctuations, but the significant reduction from €9.63 in 2006 to no payment in subsequent years represents a pronounced instability. Despite the absence of another such dramatic drop (>20%) in those years, this historic anomaly may raise red flags for potential investors who prioritize consistency. The slight drops from €0.23 in 2012 to €0.21 in 2013 and from €1.03 in 2021 to €0.04 in 2022 and 2023, while concerning, do not meet the 20% threshold. Overall, this trend is concerning, and investors should weigh this history of dividend volatility in their investment decisions.

Dividends Paid for Over 25 Years?

Historical dividend payments and consistency over such a long period are essential indicators of a company's financial health and its commitment to returning value to shareholders. A consistent dividend payment history shows that the company has stable and predictable earnings, which is vital for investors looking for income generation.

Looking at Deutsche Wohnen's historical dividends, one can see that the company did not start paying dividends until 2006, which invalidates the 25-year dividend history criterion. Moreover, the years 2006 and 2021 show significant fluctuations: a sudden spike in dividend per share in 2006 (EUR 9.63) and a reduction to almost negligible levels in 2021 and 2022 (EUR 0.04). Consistent dividend growth seems to have begun only around 2011. Therefore, Deutsche Wohnen doesn't meet the criterion of having paid consistent dividends for over 25 years. This irregular trend might not look favorable for conservative dividend investors seeking long-term stability and growth. However, the recent consistency in dividends since 2011 shows a trend toward more stable and predictable returns, which could appeal to investors seeking low-risk, long-term income.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases

Throughout the last two decades, Deutsche Wohnen has engaged in stock repurchases albeit inconsistently. In specific terms, from 2003 to 2023, there were six notable years where share buybacks transpired—2009, 2011, 2015, 2017, 2019, and 2020. The average repurchase strength comes to 15.3375%. Compared to the baseline figures at multiple intervals, 2009 saw a reduction from 52,015,952 shares to 45,291,020 shares, whereas 2015 registered 320,876,000 shares from the preceding 331,677,115. This trend appeared inconsistent in 2017 with merely 976,000 shares less and conversely, heightened over ensuing periods. The erratic nature of the stock repurchases illustrates a potential fluctuating focus on optimizing shareholder value mitigation through buybacks, signaling a medium-risk trend in long-term investment reflections.