Last update on 2024-06-28

Electricite de France (E2F.DE) - Dividend Analysis (Final Score: 3/8)

Electricite de France (E2F.DE) scored 3/8 in our detailed dividend analysis. Understand the stability and performance of their dividend policy with our insights.

Short Analysis - Dividend Score: 3

We're running Electricite de France (E2F.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Electricite de France (E2F.DE) doesn't have a very stable or strong dividend history. Its current dividend yield is lower than the industry average. The dividends have been highly volatile with negative average growth, suggesting consistent financial challenges. Although the payout ratio is generally below 65%, it's very fluctuating and often goes above this threshold. Earnings and cash flow have insufficiently covered dividends in recent years, indicating poor financial health. Dividends have also been unstable and not paid consistently for over 25 years.

Insights for Value Investors Seeking Stable Income

Given the significant volatility in dividend yield, growth, and coverage, along with unstable and inconsistent dividends and payouts that are often unsustainable, Electricite de France appears to be a risky investment for income-focused investors. It might be better to look for companies with more stable and reliable dividend histories.

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 is the financial ratio that shows how much a company pays out in dividends each year relative to its stock price. This measurement is crucial because it offers investors insight into the income generated from their investments through dividends. Generally, a higher dividend yield is more attractive to investors looking for regular income.

Electricite de France has a dividend yield of 2.3314% for 2022, which is significantly lower than the industry average of 4.14%. Over the last 20 years, EDF's dividend yield has fluctuated considerably, peaking at 10.1434% in 2016 and currently resting closer to the lower end of its historical range. The tapering in yield is mainly due to a decline in dividend payouts combined with inconsistent stock performance. While historically there have been years with higher yields compared to the industry average, the current downward trend suggests potential caution for income-focused investors. Given that the yield is now substantially below the industry benchmark, the trend is not favorable for those prioritizing dividend income.

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

The Dividend Growth Rate measures how much a company's dividend payments have increased over a specific period, typically annually. A growth rate above 5% over a long period, such as 20 years, usually indicates a company with stable and rising earnings, showcasing its ability to generate profits consistently and reward shareholders.

Reviewing the given Dividend Ratio data for Electricite de France (E2F.DE) from 2003 to 2022, it is evident that the dividend per share has been highly volatile and predominantly negative. The average Dividend Ratio over this period is -5.12608. This suggests that rather than experiencing growth, EDF has faced recurring issues or financial instability, where dividends either were cut or were highly inconsistent. For instance, there were years with steep declines like in 2017 (-46.6) and 2016 (-17.6038), while there were minor increases in some years but not consistently above 5%. The trend is bad; it indicates that the company has not managed to steadily grow its dividends, which likely reflects ongoing financial and operational challenges.

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

The payout ratio measures the percentage of earnings a company pays to its shareholders in the form of dividends. It is crucial for evaluating the sustainability of a company's dividend payment.

Electricite de France (E2F.DE) had an average payout ratio of 60.3% over the last 20 years, which is below the 65% threshold, indicating that it generally retains enough of its earnings for growth and stability. However, the ratio fluctuated significantly year-to-year, exceeding 100% in some years (e.g., 2009, 2013, 2016, 2020), suggesting periods of potential dividend sustainability challenges. A consistently lower payout ratio typically signals dividend reliability, but the extreme highs and lows indicate volatility, making it a mixed evaluation.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings when the company's earnings per share (EPS) sufficiently exceed its dividends per share (DPS). This indicates financial stability and sustained ability to pay dividends.

The historical data for Electricite de France (E2F.DE) shows a fluctuating trend in EPS, with the highest being 2.859 in 2007 and the lowest being -5.7584 in 2022. The coverage ratio of dividends by earnings has varied significantly, indicating inconsistent financial health. Notably, in 2022, the cover was negative (-0.0486), suggesting that dividends were paid despite negative earnings. The ratio often falls below 1, especially in recent years (e.g., 2019 had only 0.174, 2021 had 0.297), demonstrating that earnings have not adequately covered dividends, which is a negative trend for investor confidence and sustainability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the company generates enough free cash flow to cover its dividend payouts. This is important because it indicates the sustainability of the dividend payments and minimizes the risk of cutting or suspending dividends in the future.

Analyzing Electricite de France (E2F.DE) over a span of two decades from 2003 to 2022, one notices a troubling trend regarding the coverage of dividends by free cash flow. Only in the earlier years (2003 and 2004) did the company show a positive coverage ratio of 0.12 and 0.10 respectively. By 2005, the coverage improved slightly to 0.11 and significantly to 0.24 in 2006. However, from 2007 onwards, the situation deteriorated sharply with the dividend coverage turning negative for the majority of the years. From as early as 2008 (-1.14) onwards, there have been substantial negative coverages, plunging extremely in recent years, especially 2021 (-0.12) and catastrophically in 2022 (-0.026). The lack of sufficient coverage, and the plunge into negative values indicate that EDF has faced significant financial difficulties and may have been reliant on debt or other means to sustain its dividend payouts. This is critical as a consistently negative cash flow coverage can threaten the long-term sustainability of dividends, thereby presenting a potential risk for dividend-seeking investors.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Electricite de France (E2F.DE) and why it is important to consider

Stable dividend payments are crucial for income-seeking investors as they ensure a reliable flow of income over time, which can aid in long-term financial planning. For Electricite de France (E2F.DE), stability would mean that the dividends per share have not decreased by more than 20% from one year to the next over the past 20 years. The company had no dividends from 2003 to 2007. From 2008, when dividends were initiated, levels varied significantly. Notably, in 2016 there was a drastic drop of approximately 18.44% (from 1.1281 in 2015 to 0.921). Again, in 2018, we see a steeper drop, approximately 72% (from 0.43 in 2017 to 0.121). In 2022, it declined by around 42.49% (from 0.64 in 2021 to 0.368). Thus, EDF's dividends demonstrate high volatility and lack stability, making it not ideal for income investors.

Dividends Paid for Over 25 Years?

This criterion assesses whether a company has consistently paid dividends for over 25 years. Consistency in dividend payments can indicate the stability and maturity of the company, providing confidence to investors.

A review of Electricite de France's (E2F.DE) dividend payment history reveals that dividends have only been issued since 2008. The dividend per share varied over the following years, sometimes decreasing significantly (e.g., from 1.1941 in 2015 to 0.5254 in 2017). While the company has shown an ability to pay dividends consistently since 2008, it falls short of the 25-year benchmark. Investors seeking long-term dividend consistency may find this trend less reassuring. The fluctuation in dividend values, particularly in recent years, could reflect changes in company profitability, market conditions, or strategic reinvestment needs, signaling both potential opportunities and risks.

Reliable Stock Repurchases Over the Past 20 Years?

reliable stock repurchases over the past 20 years

The history of stock repurchases is indicative of a company's capital allocation strategies. Regular buybacks can signal management's confidence in the company's future prospects and its desire to return excess cash to shareholders. They can also lead to earnings per share (EPS) enhancement over time.