Last update on 2024-06-27

Equifax (EFX) - Dividend Analysis (Final Score: 6/8)

Analysis of Equifax (EFX) dividend performance with a final score of 6/8, using 8-criteria scoring system. Stability, growth, payout ratios, and repurchase reliability.

Short Analysis - Dividend Score: 6

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

The dividend analysis for Equifax (EFX) shows a mixed performance based on an 8-criteria scoring system, earning a score of 6. Here's a breakdown: 1. **Dividend Yield**: EFX's 0.6308% yield is significantly lower than the industry average of 1.83%, indicating it may not provide strong income returns for investors. 2. **Dividend Growth Rate**: The growth rate is highly erratic, with some years of high increases and others of negative growth, raising concerns about reliability. 3. **Payout Ratio**: Generally positive as EFX maintains an ideal payout ratio most years, though there were notable dips in 2018 and 2019. 4. **Coverage by Earnings**: Coverage is mostly adequate, but some years show negative earnings severely affecting payouts. 5. **Coverage by Cash Flow**: Long-term trend is positive, with significant fluctuations, but mainly shows resilience. 6. **Stable Dividends**: Simply states that stability over the years measures a company’s capability to pay dividends regularly. 7. **Dividends Paid for Over 25 Years**: EFX has paid dividends for over 25 years, reflecting long-term commitment and financial stability. 8. **Reliable Stock Repurchases**: Not explicitly evaluated but is essential for signaling shareholder value creation.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Equifax (EFX) shows a mixed but generally positive trend in its dividend stability and performance. The low dividend yield and erratic growth rate can be concerning for income-focused investors. However, the company's long history of dividend payments and adequate coverage by earnings and cash flow provide a level of security. Investors looking for consistent and stable dividends might need to consider these fluctuations but could view EFX as a relatively stable investment with some risks. It is worth considering for those who prioritize long-term returns more than immediate income from high yields.

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?

Explain the criterion for Equifax (EFX) and why it is important to consider

The dividend yield, calculated as dividends per share divided by the stock price, is a key measure of an investment's income-generating strength. For Equifax, the current 0.6308% dividend yield is substantially lower than the industry average of 1.83%. Historically, Equifax's dividend yield has exhibited fluctuations, reaching a peak of 1.6751% in 2018. Over the last two decades, the yield largely followed an upward trend until recently, when it began to decline. This downward trend in dividend yield, coupled with a relatively high historical average yield, raises concerns. The data shows lower dividends per share in recent years despite high stock prices, which might indicate restrained income returns for investors. This trend could be seen as negative, especially for income-focused investors relying on stable and competitive yields.

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

The Dividend Growth Rate measures the annualized percentage rate of growth for a company’s dividend payments over a specified period of time.

The Dividend Growth Rate for Equifax (EFX) over the last 20 years reveals a very erratic pattern of dividend payments, including years with no dividends at all. With an average Dividend Ratio of approximately 18.35%, some years show significant increases, such as 128.57% in 2011, but others indicate negative growth, such as -20% in 2008. These inconsistencies indicate that the company does not have a steady or reliable dividend growth trend. This lack of consistency can be concerning for dividend-focused investors. Thus, despite some high growth years, the company's dividend reliability is questionable, making this trend bad for the given criterion.

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

Explain the criterion for Equifax (EFX) and why it is important to consider

A payout ratio below 65% is generally considered sustainable and shows that a company is retaining enough earnings to invest in its growth, pay down debt, or cushion against economic uncertainties.

Dividends Well Covered by Earnings?

This criterion examines whether the company's earnings sufficiently cover its dividend payouts.

A key aspect in assessing the sustainability and health of a company's dividend policy is the Dividend Payout Ratio, represented by Dividends Covered by Earnings. For Equifax (EFX), this ratio from 2003 to 2023 showcases an increasing trend from 0.066 in 2003 to 0.352 in 2023. Notably, an ideal payout ratio is generally between 0.20 and 0.50, which indicates that the company retains enough earnings for growth while also providing shareholder returns. Equifax maintains a relatively low payout ratio for most of the 20-year period, except in 2018 and 2019, where the payout ratio was significantly negative, attributed to a dramatic dip in earnings per share (-3.299 in 2018). Given the general trend, it's positive with caution: while recent years show a consistent ability to cover dividends with earnings, spikes in portions of negative earnings highlight the importance of future sustainability measures.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates a company’s ability to generate enough cash to support its dividend payouts.

The trend of Equifax (EFX) in terms of Free Cash Flow (FCF) and Dividend Payout Amount (DPA) reflects the company’s sustainability in supporting its dividend payments. Through 2003 to 2023, EFX shows a predominantly increasing trend in FCF, peaking significantly in 2021 at $865.8 million before fluctuating. Particularly concerning is 2019, where the FCF was notably negative at -$85.8 million. This reduction severely impacted the ratio, leading to a highly negative coverage of -2.20, suggesting the dividends were not covered at all by cash flow. Yet, in 2023, the FCF rebounded to $515.5 million with a coverage ratio of 0.37. More noteworthy is the unusual spike in 2022, where although the cash flow was only $132.6 million, the ratio depicts a misleadingly high 1.44 due to relatively lower DPA. Overall, the long-term trend in dividend coverage ratios appears favorable albeit some significant fluctuations, suggesting operational resilience and cyclical challenges.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Equifax (EFX) and why it is important to consider

Stable Dividends Over the Past 20 Years measures whether a company can consistently generate enough profit to pay dividends. A drop of more than 20% is typically seen as a red flag for income-seeking investors.

Dividends Paid for Over 25 Years?

The criterion of dividends paid for over 25 years refers to the consistency and reliability of a company's dividend payments over an extended period. It is a key indicator of a company's financial health and commitment to returning value to shareholders. Consistent dividend payments over a long period can signify stable earnings and a sound business model.

Equifax (EFX) has been paying dividends steadily for over 25 years, with the given data starting from 1998. Over this period, its dividends per share have generally increased, barring some fluctuations in the early 2000s. For instance, dividends went from $0.354 per share in 1998 to $0.363 in 1999 and $0.372 in 2000. There was a substantial increase to $15.226 in 2001, which seems like an outlier. Afterwards, the dividends saw a drop and some variability but stabilized and consistently increased from 2010 onwards, reaching $1.56 per share by 2023. This long-term trend reflects positively on Equifax's financial stability and commitment to its shareholders. The overall consistency, especially noted in recent years, is favorable for long-term investors.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Equifax (EFX) and why it is important to consider

The criterion Reliable Stock Repurchases refers to a company's consistent ability to buy back its own shares from the market over a long period, such as 20 years. Evaluating a company's history of stock repurchases is crucial because it can indicate management's confidence in the company's future prospects and is often a signal of shareholder value creation. When a company repurchases shares, it reduces the total number of shares outstanding, potentially increasing the earnings per share (EPS) and likely boosting the stock's price. This is particularly important for long-term investors.