Last update on 2024-06-27

Equinix (EQIX) - Dividend Analysis (Final Score: 1/8)

Detailed analysis of Equinix (EQIX) dividend performance. Get insights on yield, growth rate, payout ratio, stability, and more. Final Score: 1/8.

Short Analysis - Dividend Score: 1

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

Equinix (EQIX) was evaluated across 8 criteria to determine its dividend performance and stability. Despite constant growth in stock prices and improvements in earnings per share (EPS), its dividend yield (1.7991%) lags behind the industry average (3.83%), showing volatility. The Dividend Growth Rate has been favorable (7.17%), exceeding the desired 5% mark but has exhibited fluctuations. With an average payout ratio of 103.76%, Equinix's ratio far exceeds the preferred 65%, signaling potential unsustainability. Although its earnings cover dividends well, fluctuating free cash flow poses risks to dividend sustainability. Equinix has consistently increased dividends since 2014 but lacks a 25-year dividend history. Stock repurchases have been infrequent, indicating a focus on reinvesting in growth rather than enhancing shareholder value through buybacks.

Insights for Value Investors Seeking Stable Income

Equinix has shown potential through robust earnings and steady dividend increases since 2014. However, its high payout ratio, dividend yield trailing the industry average, volatility in cash flows, and minimal stock buybacks might be concerns for conservative investors. Only those looking for growth potential rather than immediate high returns from dividends should consider investing in Equinix.

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 & its industry comparison

Equinix’s (EQIX) current dividend yield is 1.7991%, trailing the industry average of 3.83%. Over the past 20 years, EQIX’s dividend yield has been volatile, peaking at 5.8565% in 2015 and fluctuating between 1.3% and 3.3% in subsequent years. Despite consistent dividend payouts increasing from 0 in 2003 to 14.49 in 2023, increasing stock prices have kept the yield relatively low. Continuous growth in stock price shows positive long-term performance despite the relatively lower yield.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend distributions. A rate higher than 5% is often seen as favorable.

The average Dividend Ratio for Equinix (EQIX) over the past 20 years is approximately 7.17%. The Dividend Growth Rate fluctuated significantly, with notable negative values in 2014 and a very high value in 2015. Despite these fluctuations, the overall average surpasses the 5% threshold, which is traditionally considered favorable. This implies that Equinix has generally been successful in increasing its dividend over the long term, indicating potential positive trends for existing and prospective investors. However, the volatility in the dividend growth rates suggests the need for a cautious approach, as substantial dips can impact investor returns.

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

The payout ratio measures the percentage of earnings distributed to shareholders in the form of dividends.

Equinix's average payout ratio for the last 20 years stands at approximately 103.76%. This is significantly higher than the desired threshold of 65%. Notably, the payout ratio has been particularly volatile, with extremely high values, especially in more recent years such as 2015 (551.59%) and 2016 (390.93%). This indicates that Equinix has been distributing more than it earns as dividends quite frequently, which is a concerning trend. Since a lower payout ratio is generally preferable as it implies a greater margin of safety and retention of earnings for growth and reinvestment, Equinix's high payout ratio does not meet this criterion favorably.

Dividends Well Covered by Earnings?

Explain earnings per share trend for Equinix (EQIX) and its relevance to dividend coverage.

Equinix's EPS has shown a substantial improvement over the years, moving from negative values in the early 2000s to a robust $10.3528 in 2023. In terms of dividend coverage, the EPS values are crucial as they reflect the company's ability to generate profits. A rising EPS trend indicates growing profitability, which is essential for sustaining dividend payments.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow assess whether the company generates sufficient cash from its operations to cover its dividend payments, a vital indicator of dividend sustainability.

Equinix's free cash flow has shown significant volatility over the years. While in some years like 2022 and 2023, the company reported robust positive free cash flows of 685.178 million USD and 435.577 million USD respectively, other years, such as 2018 and 2021, displayed negative cash flows. Additionally, dividend payouts have consistently risen from 2014 onwards, substantially pressuring cash-flow coverage. A ratio comparing cash flow and dividend payments exposes inadequacies with several negative values during cash-flow deficit years. Only a few years indicate viable coverage (like 2015 and 2020), translating to considerable risk in dividend sustainability. This failing trend can be concerning for potential dividend investors.

Stable Dividends Since the Company Began Paying Dividends?

It is important to assess whether a company has maintained consistent dividend payments over the past 20 years without any significant drops (defined as a drop of over 20%). Stable dividend payments provide income reliability to the investors.

Over the past 20 years, Equinix (EQIX) exhibited a period where it did not pay any dividends from 2003 until 2013. Starting from 2014 when the company began issuing dividends, the dividend per share has shown a consistent upward trend without any year-on-year drops exceeding 20%. In fact, Equinix has demonstrated robust dividend growth from an initial payout of $7.57 in 2014 to $14.49 in 2023. This steady increase underscores a positive trend for income-seeking investors, as it implies stability and reliability in their dividend income. Hence, Equinix meets the criteria for maintaining stable dividend payments over the examined timespan, which is a good trend for dividend reliability.

Dividends Paid for Over 25 Years?

The payment of dividends for over 25 years indicates a company's long-term stability and consistent ability to generate profit, making it an attractive option for income-focused investors.

Equinix (EQIX) has not consistently paid dividends for over 25 years. According to the data, dividends began in 2014 with a dividend per share of $7.57. Since then, the company has managed to increase its dividends consistently year-over-year, reaching $14.49 in 2023. This trend is undoubtedly promising as it demonstrates the firm's capability to generate cash and return value to its shareholders. However, the lack of a 25-year history means Equinix does not fully meet the criterion. Therefore, while the current trajectory is good, the company may not attract those investors strictly looking for a long-term dividend history. For those more interested in recent performance and growth potential, Equinix’s dividend history since 2014 can still be seen as favorable.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the company's commitment to buying back its own shares from the market over a long period. This action can signal management's confidence in the company's future prospects and ability to generate cash flow.

In the past 20 years, Equinix (EQIX) has shown two specific years, 2009 and 2013, in which it engaged in stock repurchasing activities. This low frequency of buybacks (only 2 out of 20 years) could suggest that the company does not prioritize this form of returning value to shareholders regularly. Furthermore, the general trend in the number of shares has been increasing, rising from 9,604,000 in 2003 to 93,615,000 in 2023. An average repurchase frequency of 13.4448% per year over this period reflects the substantial dilution that has taken place. Therefore, traditional stock buybacks have not been a significant strategy for EQIX and might indicate a preference for reinvestment in growth opportunities. This trend can be interpreted as unfavorable from the perspective of an investor looking for consistent repurchases as a means of shareholder value enhancement.