Last update on 2024-06-28

Encavis (ECV.DE) - Dividend Analysis (Final Score: 4/8)

Encavis (ECV.DE) dividend analysis scores 4 out of 8, evaluating performance and stability with an 8-criteria system.

Short Analysis - Dividend Score: 4

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

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 stock price. It is a critical metric for income investors as it reflects the return on investment from dividends alone, without accounting for any capital gains from the stock price appreciation.

Encavis' dividend yield of 0% in 2023 marks a significant departure from its historical trend, where it consistently paid dividends each year since at least 2012. The industry average for dividend yield is 6.05% in 2023, which indicates a sector that offers substantial dividend returns. This positions Encavis in a precarious light, particularly in comparison to its peers. Historically, Encavis' dividend yield fluctuated between a low of 1.2178% in 2020 to a high of 4% in 2018. Given that the company's stock price also has experienced substantial volatility—from €3.75 in 2013 to a peak of €21.35 in 2020 before dropping to €15.59 in 2023—the consistent dividend payout was providing a degree of financial stability to investors amid stock price fluctuations. The complete omission of a dividend in 2023 could be interpreted negatively, suggesting potential financial distress, a shift in corporate strategy prioritizing reinvestment over shareholder payouts, or response to external economic factors. The significant gap between Encavis' 2023 dividend yield and the industry average also implies that current and potential investors might redirect their focus to other entities within the industry that still provide substantial dividend returns.

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

The Dividend Growth Rate indicates the annualized percentage growth rate of a company's dividend payments over a specified period of time. It is critical to evaluate both investor income potential and a company's financial health.

The dividend per share ratio for Encavis has fluctuated significantly over the last 12 years, with some negative values in recent years. The average dividend ratio of 9.030875% over this period shows a positive trend. However, the consistency of growth above 5% annually is questionable due to fluctuations. This variable trend is not ideal because stable and consistent growth is preferable for indicating a company's reliable financial health.

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

Why is an average payout ratio lower than 65% important for evaluating a company's dividend sustainability?

Examining the payout ratio of Encavis (ECV.DE) over the last 12 years reveals that their average payout ratio stands at 65.91%, which is slightly above the desired threshold of 65%. A consistently high payout ratio, especially values exceeding 100% as observed in several recent years, can signal potential risks. Specifically, in 2017, 2018, 2019, and 2020, the payout ratios were abnormally high, suggesting that the company might have been paying more in dividends than it earned. This trend of volatile payout ratios is concerning from an investor's perspective as it hints at potentially unsustainable dividend payments. Conversely, the notable low ratio in 2021 and 2022 demonstrates that the company has taken measures to rebalance its payout practices. Hence, while Encavis has exceeded the 65% ideal benchmark on average, recent trends indicate a move towards stabilization, which might be beneficial for long-term sustainability of dividend payouts.

Dividends Well Covered by Earnings?

Dividends are well-covered by earnings

The coverage ratio of dividends by earnings per share (EPS) provides insight into the sustainability of dividend payments. This criterion measures whether a company earns enough to support its dividend payouts. A ratio above 1 indicates that earnings are sufficient to cover the dividends, hence suggesting financial stability and a likely continuation of dividend payments. Conversely, a ratio less than 1 may indicate potential financial stress or dwindling future dividends.

Dividends Well Covered by Cash Flow?

Why is cash flow coverage of dividends important?

The company's ability to cover its dividend payouts with its free cash flow is crucial for ensuring the sustainability of its dividend policy. When dividends are well covered by cash flow, it indicates that the company generates enough cash from its operations to meet its dividend commitments without having to resort to external financing or depleting cash reserves. This is a sign of financial health and stability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are crucial as they provide consistent income to investors, signaling financial health.

Encavis shows a generally upward trend in dividends from 2012 to 2022, increasing from €0.05 to €0.30 per share. However, the drop to €0 in 2023 raises alarms. While there were no drops exceeding 20% year-over-year previously, the recent cessation of dividends complicates the otherwise positive trend. Financial reassessment may be needed.

Dividends Paid for Over 25 Years?

Evaluate whether a company has paid dividends for over 25 years and why this is an important criterion when analyzing a dividend stock.

Encavis (ECV.DE) has only been paying dividends from 2012 to 2022, spanning a period of 11 years. This 11-year dividend history shows a trend of consistent payouts, gradually increasing each year from €0.05 to €0.30 per share over this period. While it hasn't reached the benchmark of paying dividends for over 25 years, which is often seen as a sign of a well-established, mature company capable of consistently returning profits to shareholders, Encavis' decade-long trend of increasing dividends is still noteworthy. The recent omission of a dividend in 2023, however, could raise concerns about the company's current financial health or strategic redirections. Overall, while Encavis does not meet the 25-year criterion, it does show a positive dividend growth trend, with a recent disruption that may necessitate a deeper investigation into the current circumstances.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

The number of shares in Encavis from 2012 to 2023 shows limited activity in stock repurchases. The one notable year when shares were repurchased is 2015. Subsequent years like 2016 and 2017 show no data or reductions in shares that could be attributed to other activities. Most years, particularly from 2018 onwards, present a trend of increasing share numbers, indicating dilution rather than repurchases. The average repurchased over 20 years is negative (-6.9447), verifying that repurchases are minimal. Therefore, Encavis has not systematically conducted reliable stock repurchases, which generally could be a negative trend for shareholders preferring new significant control.