Last update on 2024-06-27

Elmos Semiconductor (ELG.DE) - Dividend Analysis (Final Score: 6/8)

Elmos Semiconductor's dividend analysis scores 6/8, evaluating dividend policy performance on stability, growth rate, and sustainability over 20 years.

Short Analysis - Dividend Score: 6

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

Elmos Semiconductor (ELG.DE) was assessed using an 8-criteria scoring system, receiving a dividend score of 6. The stock's current dividend yield of 1.0135% is significantly higher than the industry average of 0.34%, indicating attractive income potential for investors. However, its dividend payout history shows inconsistency and high volatility, especially with many years of no dividends from 2003 to 2011. Despite an overall upward trend, such volatility may be concerning. The average payout ratio is 30.6%, suggesting a conservative approach, but the dividends have had mixed coverage by cash flow, with recent negative trends in 2019 and 2023. The company has only paid dividends consistently since 2011, falling short of the 25-year benchmark, signaling that while there is growth, it lacks long-term reliability. The company has demonstrated consistent stock repurchases, which positively influences earnings per share and shows a commitment to shareholder value.

Insights for Value Investors Seeking Stable Income

While Elmos Semiconductor shows promise with a higher-than-industry dividend yield and consistent stock repurchases, its inconsistent dividend payout and short history of only 12 years compared to the preferred 25 years may pose risks for dividend-seeking investors. Investors should consider these factors, particularly if they seek stable long-term dividend payments. Therefore, it may be worth watching, but caution is advised, especially for those prioritizing consistent and stable returns.

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 dividend income as a percentage of the stock price. It's a critical metric for income-focused investors, as a higher yield can indicate attractive income generation from the stock.

Elmos Semiconductor's current dividend yield stands at 1.0135%, which is significantly higher than the industry average of 0.34%. Historically, the company's dividend yield has largely outperformed the industry. Over the last two decades, Elmos Semiconductor's dividend yield peaked at 3.7887% in 2020 and has remained above the industry average in almost all years. The stock price's general upward trend also bodes well; for instance, the stock price has climbed from €12.5 in 2003 to €74 in 2023, despite fluctuations. The higher yield signifies robust dividend payouts relative to its stock price, making it an attractive option for dividend-seeking investors.

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

The Dividend Growth Rate represents the annualized percentage rate of growth of a company's dividend payments made to shareholders. It is an essential criterion because it indicates the company's ability to consistently increase its dividend payout, reflecting strong financial health and profitability.

Based on the provided Dividend Ratio, Elmos Semiconductor (ELG.DE) shows an erratic dividend payout history. The Dividend Ratio values illustrate that for many years (from 2003 to 2011), the company did not pay dividends. It only started distributing dividends significantly in 2012, with frequent interruptions and notable fluctuations including negative growth in 2021 and 2023. For instance, a sharp increase to a 100% ratio in 2020 followed by a dramatic decrease to -50% in 2021 marks high volatility. This inconsistency indicates that the average dividend ratio might be misleading when measuring genuine, stable dividend growth. Thus, the trend of high volatility and intermittent payouts could be seen as unfavorable, particularly for dividend-seeking investors, even though selective years show exceptional growth.

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

Average payout ratio indicates the proportion of earnings a company pays to its shareholders as dividends. It's pivotal in assessing dividend sustainability. A lower ratio implies that the company retains more earnings for growth.

From 2003 to 2023, Elmos Semiconductor's average payout ratio stands at approximately 30.6%. This is considerably below the 65% threshold, signaling a conservative dividend policy. The spikes in 2011, 2020 may warrant further scrutiny, but overall, it reflects a sustainable dividend approach.

Dividends Well Covered by Earnings?

Why is it important to consider that dividends are well covered by the earnings?

Assessing whether dividends are well covered by the earnings per share (EPS) is critical for determining a company's financial stability and dividend sustainability. If a company's dividends exceed its earnings, it may indicate that the company is overextending itself, possibly resulting in future dividend cuts or financial stress. Adequate earnings coverage also reflects positively on management's prudence and the underlying profitability of the business.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicate a company's ability to generate enough cash to pay its dividends, ensuring sustainability.

Analyzing the free cash flow against the dividend payout for Elmos Semiconductor (ELG.DE) reveals significant fluctuations over the last two decades. The coverage ratio varies substantially from a low of -2.484 in 2019 to a high of 1.984 in 2020. Notably, the dividend was not covered by cash flow in multiple years, including 2005, 2017, 2018, and 2019, with negative ratios indicating cash had to be sourced from other means to cover dividends. Positive coverage more than 1 implies strong financial health, seen in years like 2011 and 2020. Recent trends show a mixed outlook, with coverage falling to -0.523 in 2023, suggesting potential risks. Monitoring and addressing these fluctuations is crucial for sustaining dividend payouts.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past two decades indicate a reliable and consistent return for income-seeking investors.

Examining the dividend payments of Elmos Semiconductor (ELG.DE) over the past 20 years reveals a significant increase from 0 in the early part of the period to 0.75 in 2023. A notable dip occurred in 2021 where the dividend per share dropped from 1.04 to 0.52, a drop of 50%. This drop exceeds the 20% threshold considered stable, indicating some volatility. Despite the overall upward trend, income-seeking investors may have some concerns regarding the stability, particularly in the year 2021. However, the recovery in subsequent years to 0.65 in 2022 and 0.75 in 2023 shows resilience and the company's capability to rebound.

Dividends Paid for Over 25 Years?

Assessing if a company has paid dividends consistently over 25 years indicates stability, reliability, and shareholder-friendly policies. It's important as it denotes a dependable source of income for investors.

Elmos Semiconductor has paid dividends since 2011. Starting at €0.2 per share, they have continuously increased to €0.75 in 2023. This 12-year trend shows a commitment to returning value to shareholders, but it falls short of the 25-year mark. Therefore, while the trend is upwards and positive for investors in terms of growing dividends, the company lacks the long-term track record that is often associated with increased confidence and stability. This trend is good in the short to medium term but needs a longer history to be considered highly reliable.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a firm's commitment to returning value to shareholders by reducing the number of outstanding shares. This practice can lead to an increase in earnings per share (EPS) and a higher share price. Evaluating long-term repurchase trends helps in assessing the company's financial health and prioritization of shareholder value.

Over the past 20 years, Elmos Semiconductor has demonstrated a pattern of reliable stock repurchases in eight out of those years: 2005, 2008, 2012, 2016, 2017, 2019, 2020, 2021, 2022, and 2023. The data indicates that despite fluctuations in the number of shares, the company managed to reduce its average outstanding shares by approximately 5.58%. This decreasing trend is favorable because it shows management's consistent effort to enhance shareholder value over a long period. Additionally, the significant buybacks in recent years (especially noticeable in 2020, 2021, and 2022) signal confidence in the company's future prospects. Such actions often positively influence market perception and reflect robust financial health.