Last update on 2024-06-27

Eastman Chemical (EMN) - Dividend Analysis (Final Score: 7/8)

Eastman Chemical (EMN) dividend analysis scores 7/8, evaluating yield, growth, payout ratio, earnings, and cash flow coverage, plus 25+ years continuity.

Short Analysis - Dividend Score: 7

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

Eastman Chemical (EMN) underwent a thorough dividend analysis based on an 8-criteria scoring system. Below is a concise summary of EMN's performance: 1. **Dividend Yield**: EMN's current dividend yield of 3.54% is below the industry average of 4.85%. Throughout the past two decades, its yield has consistently been lower, except during economic downturns, indicating potential overpricing relative to peers. 2. **Average Annual Growth Rate**: There's significant volatility in dividend growth with an average of 6.46%. Despite some high payouts, the inconsistency makes it challenging to judge this positively. 3. **Payout Ratio**: Over 20 years, EMN maintained an average payout ratio of 37.1%, well below the 65% threshold, signaling sustainable financial management. 4. **Coverage by Earnings**: EMN's dividends are well-covered by earnings, showing robust financial health and a promising outlook for consistent dividend payments. 5. **Coverage by Cash Flow**: Dividend coverage by cash flow has been inconsistent over the years, with some periods showing strong coverage and others falling short. 6. **Stable Dividends**: EMN has consistently paid dividends, growing from $0.88 in 2003 to $3.18 in 2023, displaying a dependable income source. 7. **Long-Term Payment**: EMN has paid dividends for over 25 years, showcasing its financial stability and commitment to shareholders. 8. **Stock Repurchases**: Over the past 20 years, EMN has reliably repurchased shares, further boosting shareholder value.

Insights for Value Investors Seeking Stable Income

Eastman Chemical (EMN) scores a solid 7 out of 8 according to the analysis, highlighting its strong dividend payout, sustainable financial management, and commitment to returning value to shareholders. However, for those primarily seeking a high dividend yield compared to industry benchmarks, EMN might fall short. On the positive side, the company's growth in dividends and reliable track record of over 25 years are attractive for investors seeking long-term stability and confidence. Considering these factors, EMN appears to be a good investment choice for those valuing stability and growth over high immediate 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 Eastman Chemical (EMN) and why it is important to consider

Eastman Chemical's (EMN) current dividend yield of 3.5404% is lower than the industry average of 4.85%. The dividend yield provides a measure of the income generated by the dividend relative to the stock price, and a yield lower than the industry average may suggest that EMN's stock is potentially overpriced or that its dividend payouts are not as generous compared to its peers. Reviewing historical data, we can see that EMN's dividend yield has been below the industry average for most of the past 20 years, occasionally spiking above it during economic downturns or periods of market stress, such as in 2008 (EMN: 5.5503% vs. Industry: 3.68%) and 2022 (EMN: 3.7696% vs. Industry: 3.59%). Notably, the current yield of 3.5404% is near its historical peak over the past two decades, excluding the mentioned timeframes. While the dividend per share (DPS) has consistently grown over the years, moving from $0.88 in 2003 to $3.18 in 2023, the relative conclusion is impacted by the rise in the stock price, which jumped from $19.765 in 2003 to $89.82 in 2023, explaining some of the stability or modest increase in yield. In this light, a consistently lower yield, despite increasing DPS, emphasizes a strong stock price appreciation, underscoring investor confidence. However, if income generation is the primary goal, EMN might not meet all investor expectations when benchmarked against the broader industry.

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

A consistent dividend growth rate higher than 5% over 20 years indicates strong financial health and confidence by the company in its cash flow and profitability.

Examining the provided dividend per share ratio data over the last 20 years for Eastman Chemical (EMN), we see significant volatility with dramatic changes in several years. For instance, the dividend per share ratio turned negative in 2007 (-0.565), reflecting a dividend cut, and shows high values in certain other years like 2011 (10.6145) and 2022 (8.4806). The average dividend ratio over this period is 6.46%, indicating some above-average payouts but with considerable inconsistency. There's no clear upward trajectory or consistent above 5% growth indicating a substantial dividend growth rate over the whole period. Hence, it's challenging to conclude this trend as definitively positive given the inconsistent dividend performance. However, the relatively high average and occasional surges do provide some optimism.

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

Average payout ratio being lower than 65% ensures that the company is not over-distributing its earnings as dividends, indicating a sustainable dividend policy.

Eastman Chemical (EMN) has demonstrated a commendable ability to manage its payout ratios effectively over the last 20 years. With an average payout ratio of around 37.10%, which is significantly below the 65% threshold, EMN is in a healthy position regarding dividend sustainability. This trend is favorable, suggesting that the company strikes a good balance between rewarding shareholders and retaining earnings for growth. The payout ratios fluctuated over the years, with significant dips (e.g., around 16.79% in 2013) and spikes (e.g., around 94.99% in 2009), yet the average remains comfortably below the critical level. Anomalies like the negative payout ratio in 2003 or the extremely high one in 2009 may flag one-off impacts or extraordinary financial events, but they do not detract from the overall positive trend.

Dividends Well Covered by Earnings?

Explain the criterion for Eastman Chemical (EMN) and why it is important to consider

The dividends being well-covered by earnings is crucial as it confirms the company’s ability to continue paying dividends without compromising its financial health. Simply put, the earnings per share (EPS) should be significantly higher than the dividends per share (DPS) to ensure a robust dividend coverage ratio (DCR). A higher DCR suggests that the company generates enough profit to sustain, or even increase, its dividends. This is a positive indicator for income-focused investors looking for stability and growth in their dividend income.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow highlights the company's ability to cover its dividend payouts from its available free cash flow. It is crucial as it reflects financial health and sustainability.

Examining Eastman Chemical's free cash flow and dividend payout over the years, we notice a varied trend. In some years such as 2003, 2008 and 2022, the company had a significantly high ratio of free cash flow covering the dividends. In others, like 2010 and 2014, the ratio was relatively low. A consistently higher ratio (above 1) is more favourable as it indicates that dividends are well covered by free cash flow, implying lower risk of dividend cuts or financial instability. However, ratios greater than 1.0, indicating dividends are not well covered by cash flow, have been volatile.

Stable Dividends Since the Company Began Paying Dividends?

Explanation of the importance of stable dividends over the past 20 years and why it's critical for investors.

Eastman Chemical (EMN) has demonstrated commendable stability in its dividend payments over the past two decades. Starting from $0.88 per share in 2003, the dividend has steadily increased, reaching $3.18 per share in 2023. There has been a consistent upward trajectory without any significant drops, let alone a drop exceeding 20%. For income-seeking investors, this is a positive sign, indicating the company's reliability in generating shareholder returns through dividends. The trend is highly favorable for those looking for dependable income sources.

Dividends Paid for Over 25 Years?

Dividends paid continuity for over 25 years is a marker of reliability and financial stability.

Eastman Chemical (EMN) has steadily paid dividends for over 25 years, showcasing their commitment to shareholders. Reviewing the data from 1998 to 2023, there has been a consistent annual dividend payout, rising from $0.88 in 1998 to $3.18 in 2023. This consistent increase not only indicates stability but also a growing return on investment for shareholders. With 26 years of uninterrupted dividends, this trend is highly favorable and reflects well on EMN's financial health and management's prioritization of shareholder value.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over a long period indicate strong financial health and commitment to returning value to shareholders.

Eastman Chemical has reduced its number of outstanding shares consistently over the past 20 years, particularly from 2008 to 2023, except for a few years. The average share repurchase rate of -1.2368% per year is a positive trend, indicating a consistent effort to buy back shares, thus likely enhancing shareholder value by increasing earnings per share and providing support for the stock price. This trend is generally good for the company and its investors, as it reflects management's confidence in the company's future performance.