Last update on 2024-06-27

Expeditors International of Washington (EXPD) - Dividend Analysis (Final Score: 7/8)

Explore the in-depth dividend analysis of Expeditors International of Washington (EXPD) with a top score of 7/8 based on 8 criteria evaluating stability and performance.

Short Analysis - Dividend Score: 7

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

Expeditors International of Washington (EXPD) has a strong dividend policy based on an 8-criteria scoring system that analyzes dividend yield, growth rate, payout ratio, coverage by earnings and cash flow, stability, and stock repurchases. The company scores 7 out of 8, demonstrating positive trends, particularly in maintaining a low payout ratio, stable dividends, robust earnings and cash flow coverage, and reliable stock repurchases. However, its dividend yield is lower than the industry average, which may be a disadvantage for income-focused investors.

Insights for Value Investors Seeking Stable Income

Given the solid performance in most criteria, especially in stability, growth, and dividend coverage, EXPD seems to be a reliable option for long-term investment, especially for those interested in potential capital appreciation. However, investors strictly seeking high dividend yields might want to look elsewhere due to its below-industry-average yield.

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?

The dividend yield indicates the annual dividend payout as a percentage of the current stock price and reflects the income-generating potential of an investment.

The dividend yield of Expeditors International of Washington (EXPD) stands at 1.0849%, which is lower than the industry average of 2.27%. Historically, EXPD's dividend yield has shown a range of fluctuations over the past 20 years, from a low of approximately 0.3937% in 2004 to highs surpassing 1.4% in years like 2012 and 2014. In 2008, the dividend yield notably increased to 0.9618% amid the financial crisis, where stock prices generally declined, providing higher yields. However, over the past five years, the yield has remained relatively flat and even slightly declined, mirroring the increment in stock prices from $52.96 in 2016 to a high of $134.29 in 2021 before a correction to $127.2 in 2023. This decreasing yield highlights a trend where the stock's price appreciation has outpaced the growth in dividend payouts ($1.38 per share in 2023). Such divergence indicates that while the company’s stock remains attractive from a capital gains perspective, it may be less appealing for income-focused investors seeking higher yield, especially compared to the broader industry.

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

The Dividend Growth Rate criterion examines the annualized percentage rate at which a company's dividend grows over a specified period. Consistent growth often indicates a healthy cash flow and a shareholder-friendly management.

In assessing Expeditors International of Washington (EXPD), we observe fluctuating dividend growth rates over the past 20 years, with an average of 16.72%. Notably, while several years exhibit dividend growth far greater than 5%, the trend is not consistently steady. For instance, in years like 2008 and 2020, the growth dipped drastically to 14.2857% and 4%, respectively. Overall, the fact that the average growth rate is significantly above 5% is commendable, indicating a strong long-term growth trend, reflecting positively on the company's commitment to returning value to shareholders despite occasional variances.

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

The payout ratio indicates the percentage of earnings a company pays to its shareholders in the form of dividends. A ratio under 65% suggests the company is retaining a good portion of its earnings for growth and operations.

Expeditors International of Washington (EXPD) maintains an average payout ratio of 25.56% over the last 20 years, which is significantly lower than the 65% threshold. This low payout ratio signals strong earnings retention and suggests the company is efficiently reinvesting its earnings into growth and operations. The trend is positive, especially since the highest payout ratio recorded during this period was 35.603% in 2012, which is still well below the 65% mark. Maintaining a low payout ratio can imply financial stability and operational efficiency, which are favorable for long-term investors.

Dividends Well Covered by Earnings?

Assesses whether the company's earnings adequately cover its dividend payouts, critical for dividend sustainability.

Expeditors International of Washington (EXPD) demonstrates generally strong coverage of dividends by earnings per share (EPS) over the years. From 2003 to 2023, the EPS consistently outpaces dividends per share, as indicated by the ratios ranging from 0.138 to 0.356. High values, such as >0.25, reveal robust earnings in covering dividend payments, highlighting company’s ability to sustain and potentially grow dividends. Therefore, EXPD shows a positive trend in maintaining covered dividends, crucial for investment stability.

Dividends Well Covered by Cash Flow?

Dividend coverage by cash flow refers to the ratio of a company's free cash flow to its total dividend payout amount. This criterion is important because it indicates a company’s ability to pay dividends from its operating cash flow rather than relying on external financing or depleting its cash reserves.

Over the years 2003 to 2023, Expeditors International of Washington (EXPD) maintains a relatively consistent dividend coverage ratio by free cash flow, generally fluctuating between 0.17 and 0.38. The ratio went through notable peaks and troughs but remained robust. For instance, in 2022, the ratio dropped dramatically to 0.10, suggesting that only 10.5% of free cash flow covered the dividend payout; this was due to a significant rise in free cash flow paired with stable dividend disbursements. Despite such fluctuations, the dividend coverage ratio staying largely above 0.20 signifies that EXPD generates sufficient cash flow to cover its dividends. This trend is favorable as it reflects a generally stable and somewhat conservative approach towards dividend policy and financial management.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over 20 years is crucial as it indicates a company's reliable income stream, fostering investor confidence.

Expeditors International of Washington (EXPD) has demonstrated outstanding dividend stability over the last 20 years. From 2003 to 2023, the dividend per share has steadily increased from $0.08 to $1.38. The data shows consistent growth in dividend payments without any significant drops. This stability reflects positively on the company's financial health and profitability, suggesting a reliable income stream for long-term income-seeking investors. Furthermore, the lack of a 20% drop in dividends shows robust earnings management and financial resilience, making EXPD a potentially attractive investment for dividend-focused portfolios.

Dividends Paid for Over 25 Years?

Evaluate whether the company has been paying dividends for over 25 years and why this is significant for long-term investors and dividend stability.

Expeditors International of Washington (EXPD) has consistently paid dividends since 1998, with dividend per share increasing from $0.0175 in 1998 to $1.38 in 2023. That's 26 years of uninterrupted dividend payments, showcasing the company's commitment to returning value to shareholders. This trend is positive as it indicates stability, reliability, and likely a solid financial footing. This long history of dividend payments could make EXPD appealing to long-term income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Explain Reliable Stock Repurchases as a criterion and why this is important to consider.

Over the past 20 years, Expeditors International of Washington (EXPD) has shown a consistent pattern of stock repurchases. Beginning in 2006 and continuing nearly uninterrupted until 2023, the company has reduced its number of outstanding shares from 223,267,212 in 2005 to 149,141,000 in 2023. The average shares repurchased annually over this period is approximately -1.8531%. This trend indicates a strong and stable commitment to returning value to shareholders through buybacks, which often signals the company's confidence in its financial health and future prospects. The ability to repurchase shares for 18 out of the last 20 years is marked as highly reliable and suggests that EXPD prioritizes shareholder value creation. This is a good trend for investors as it not only potentially enhances earnings per share (EPS) but also aligns management's interest with those of shareholders.