Last update on 2024-06-28

Enel (ENL.F) - Dividend Analysis (Final Score: 2/8)

In-depth analysis of Enel's (ENL.F) dividend performance using an 8-criteria scoring system. Examines yield, growth, payout, stability, and more. Final Score: 2/8.

Short Analysis - Dividend Score: 2

We're running Enel (ENL.F) 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 and why it is important to consider.

Enel's current dividend yield of 5.9259% significantly surpasses the industry average of 3.75%. Over the past 20 years, Enel's dividend yield has shown considerable fluctuations, peaking at 9.6296% in 2009 during the financial crisis and stabilizing around 7-9% in recent years. This high yield reflects Enel's strong dividend policy despite varied market conditions and indicates a potentially attractive income stream for dividend-seeking investors.

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 or decreased over a specified period. A growth rate higher than 5% typically indicates healthy and consistent profitability, a key factor for dividend investors looking for both income and growth.

When analyzing Enel’s dividend growth over the last 20 years based on the provided Dividend Ratio, we see immense fluctuation. For instance, it witnessed steep declines of -42.6923% in 2009, -42.8571% in 2012, and -29.7597% in 2022. Contrarily, growth spiked at 95% in 2009 and 64.939% in 2021. Despite substantial years of negative growth, the average growth rate is approximately 7.48%, above the 5% threshold. This overall trend is still positive and suggests that Enel has had periods of significant dividend increases, even though it experienced high volatility. Evaluating if this trend is good or bad depends on investor risk tolerance; those desiring steady, less erratic dividend growth might find this pattern concerning.

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

payout ratio and its significance

In analyzing Enel (ENL.F), it's essential to consider the payout ratio, which is the proportion of earnings a company pays to its shareholders in dividends. Significance lies in balancing retained earnings for growth while rewarding shareholders. Enel's average payout ratio over the past 20 years stands at 71.71%, slightly above the recommended maximum of 65%. The trend shows significant fluctuations. For example, in 2012, the payout ratio peaked at 131.9%, even reaching 229.61% in 2022. These occasional spikes could indicate potential issues with earnings stability or possible changes in dividend policy. Despite having values well under 65% in some years, the inconsistency reduces investor confidence in reliable dividend payments.

Dividends Well Covered by Earnings?

Why is it important to consider if dividends are well covered by the earnings, specifically in the context of Enel (ENL.F).

The ratio of Earnings per Share (EPS) to Dividends per Share (DPS) is crucial for the sustainability of dividend payments. For Enel (ENL.F), the EPS to DPS ratio over several years shows fluctuations. In 2020, the ratio was 1.724, indicating that earnings sufficiently covered the dividends, but the cover ratio has reduced in recent years to 1.182 in 2023. This trend may be concerning as lower ratios suggest that dividends might not be sustainable if the company cannot maintain or improve earnings.

Dividends Well Covered by Cash Flow?

It is crucial to assess whether a company's dividends are well covered by its free cash flow to ensure sustainability of dividend payouts. This indicates the company's ability to generate enough cash to fulfill its dividend obligations without relying on external financing.

Analyzing Enel's (ENL.F) free cash flow and dividend payout from 2003 to 2023, it is evident that there have been significant fluctuations. Notably, free cash flow was non-existent from 2003 to 2016. From 2017 onwards, there was a positive spike (with a peak of 2,816 million in 2018), yet negative figures emerged again in 2019 and 2020. Concerning dividends, payout has increased over time, with no correlating constant increase in free cash flow. The ratio of free cash flow to dividend payout highlights critical points; negative coverage in 2019-2020 is troubling as it implies reliance on debt or reserves, while a positive ratio of 2.77 in 2023 is favorable, indicating strong coverage. The inconsistency in cash flow raises caution regarding future dividend sustainability despite recent improvements.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years imply consistent returns and reduced risk for income-oriented investors. Dividends dropping by less than 20% ensures reliability.

Upon analyzing Enel's dividend per share data over the last 20 years, it is noticeable that the company has experienced fluctuations. However, the only period of significant drop such as the one of 2011 at €0.16 from 2010’s €0.2235 (-28.41%). Contrary to the presented trend, however, this drop did happen and hinders dividend reliability. Outside this gap, the dividends have generally advanced. As such, strictly for stability seekers, this might be a point of concern.

Dividends Paid for Over 25 Years?

A company paying dividends consistently over a long period, such as 25 years, demonstrates financial stability and commitment to returning value to shareholders. It's an indicator of the firm's profitability, robust cash flow, and overall health.

Based on the data provided, Enel (ENL.F) has not paid dividends consistently over the 25-year period. The dividend payments only began in 2008, which means the company does not meet the criterion of 25 years of consistent dividend payments. However, since inception in 2008, the company has demonstrated a pattern of increasing dividends, with minor fluctuations. For instance, dividends surged from €0.2 in 2008 to €0.4 in 2023. This growth correlates positively with investor confidence and the company's financial improvement over the years. This positive trend is good, but the criterion specifically seeks consistent dividends for 25 years, and this requirement is unmet, reflecting a potential instability in historical financial management or previous strategic decisions to reinvest in growth rather than distribute dividends.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases provide shareholders with a return on investment and help increase the value of remaining shares by reducing the number of outstanding shares. These actions can signal a company's strong financial health and commitment to returning wealth to its shareholders.

Over the past 20 years, Enel has engaged in stock repurchases sporadically. Beginning with no stock outstanding in 2003, the number of shares surged to around 9.4 billion shares by 2009 and remained stable at that level for quite some time. The company then increased its shares noticeably in 2015 to almost 10 billion and consistently followed a repurchase trend since 2019, reducing the number of outstanding shares yearly. This indicates a more recent commitment to repurchasing, reflecting heightened efforts starting around 2019. Observably, Enel managed to consistently lower its outstanding shares over the past five years, averaging a repurchase ratio of approximately 1.9284, reflecting favorably upon its shareholder-centric policies and suggesting improved financial health lately. This is considered a positive trend, but the absence of consistent repurchases over the long term may imply past uncertainty or strategic shifts in capital utilization.