Last update on 2024-06-27

Exponent (EXPO) - Dividend Analysis (Final Score: 6/8)

In-depth dividend analysis of Exponent (EXPO) using an 8-criteria system, scoring 6/8 points. Discover performance, stability, and growth for income-focused investors.

Short Analysis - Dividend Score: 6

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

Exponent (EXPO) has undergone an 8-criteria dividend policy analysis, scoring 6/8 overall. The company produces a low dividend yield of 1.1813%, below the industry average of 1.83%, potentially less attractive to income-focused investors. Despite this, EXPO boasts a strong financial stance, evidenced by a low average payout ratio of 23.40%, well below the 65% benchmark. Dividends are well managed, being adequately covered by both earnings and cash flow. EXPO has also shown consistency in dividend growth since beginning payouts in 2013 and maintained stable and increasing dividends each year. However, it's only been paying dividends for 11 years, missing the 25-year mark. The company's history of slightly reducing outstanding shares showcases management's confidence through reliable stock repurchases.

Insights for Value Investors Seeking Stable Income

Considering Exponent's robust financial health, strong dividend management, and consistent growth, it appears to be a good long-term investment despite the lower dividend yield. The stability and growth in dividend payouts, along with prudent payout ratios, suggest potential for future increases. It's worth exploring further, especially if reinvestment and long-term growth are prioritized over immediate high income.

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 is a financial ratio that shows how much a company pays out in dividends relative to its stock price. It is crucial because it provides investors with insight into the income they may generate from a particular investment.

The dividend yield of Exponent (EXPO) is currently 1.1813%, which is significantly lower than the industry average of 1.83%. Examining the trend over the last 20 years, it is apparent that EXPO has consistently had a lower dividend yield compared to the industry average, except for the initial years when no dividends were paid. This relatively low yield could suggest that EXPO is less attractive to income-focused investors compared to other companies within the same industry. However, a deeper look into the company’s financial health and other dividend metrics is warranted before making a final judgment.

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

What constitutes a healthy long-term Dividend Growth Rate?

A healthy long-term Dividend Growth Rate is an indicator of both corporate profitability and confidence from the company's leadership in its future earnings. Given the complexity of forecasting dividends over a long period and the influence of various internal and external factors, a growth rate above 5% in the last two decades signals robust growth and stability.

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

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

An average payout ratio lower than 65% is generally seen as a good indicator of dividend sustainability. It means the company retains more of its earnings to reinvest in growth opportunities or to cushion against economic downturns. Exponent (EXPO) exhibits an average payout ratio of 23.40% over the past 20 years, significantly lower than the 65% threshold. This trend is beneficial, suggesting the company has been prudent in its dividend payouts. The deviation in 2018, where the ratio peaked at 67.95%, appears to be an isolated incident. Supported by robust financial health, EXPO's lower average payout ratio underlines financial stability and sustained potential to deliver dividends. It reaffirms investor confidence.

Dividends Well Covered by Earnings?

Assessing whether dividends are well covered by earnings helps determine a company's ability to sustain its dividend payouts and imply financial stability.

From 2013 onwards, Exponent (EXPO) started paying dividends. The coverage ratio of dividends by earnings per share has seen an upward trend, starting from 0.21 in 2013 and reaching 0.53 in 2023. However, the coverage ratios fluctuate and do not present a consistently rising trend, showing variations between 0.36 and 0.68 in certain years, which could raise some concerns. Despite this, the overall trend is positive with the latest ratios indicating that dividends are covered by more than 50% of earnings, ensuring a reasonable safety margin. This is a good indicator for investors, as it reflects that the company can sustain and potentially increase its dividends in the future, underlined by the 53% coverage in 2023.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow assesses a company's ability to sustain its dividend payouts through generated cash flows.

The data shows that Exponent maintained a high level of free cash flow, fluctuating from $14.13 million in 2003 to $110.996 million in 2023. Similarly, dividend payouts began in 2014 at $7.93 million and increased steadily to $54.04 million in 2023. Notably, the ratio of dividends covered by cash flow has generally been improving, rising from 14.27% in 2014 to a high of 60.22% in 2022 before slightly declining to 48.69% in 2023. This changing ratio demonstrates that Exponent has been increasingly covering its dividend outflows with its cash inflows, a favorable trend indicating strong financial health. This is especially positive since a higher ratio means the company has more readily available cash to cover dividends, reflecting operational efficiency and prudent financial management. The improvement is robust, and only the slight dip in 2023 needs attention to ensure that it does not become a downward trend.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years means that the company has not reduced its dividend per share by more than 20%, which is crucial for income-seeking investors as it ensures a reliable income stream.

Despite Exponent (EXPO)'s significant rise in dividends since it began paying them in 2013, the data shows no year where the dividends dropped by more than 20%. Instead, the dividends per share have steadily increased—from $0.15 in 2013 to $1.04 in 2023. This trend represents robust financial health and a commitment to returning value to shareholders, making EXPO an attractive option for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is a measure of a company's commitment to returning value to shareholders consistently over a long period. It indicates financial stability and reliability.

Based on the given data, Exponent (EXPO) started paying dividends in 2013 with a dividend per share of $0.15. Since then, they have progressively increased their dividend to $1.04 per share in 2023. However, as they have only been paying dividends for 11 years, this does not meet the criterion of paying dividends for over 25 years. While the trend is good, showing a consistent increase in dividend payments, it falls short of demonstrating long-term commitment and stability over 25 years.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to a company's consistent effort to buy back its own shares from the market. This reduces the total number of outstanding shares, typically leading to an increase in earnings per share (EPS) and also signals management's confidence in the company's future. A stable or declining number of shares year over year can be a positive indicator for long-term investors.

Over the past 20 years, Exponent's number of shares outstanding has generally declined from 60,304,000 in 2003 to 51,152,000 in 2023. The trend shows reliable stock repurchases in most of the years except for a few. The overall average repurchase rate is approximately -0.7772%, indicating a slight reduction in outstanding shares annually. This trend is positive as it suggests that Exponent's management has consistently executed share buybacks, thereby potentially enhancing shareholder value.