Last update on 2024-06-27

Franklin Electric (FELE) - Dividend Analysis (Final Score: 6/8)

Franklin Electric (FELE) - Comprehensive dividend analysis revealing insights on performance, stability, and growth prospects based on an 8-criteria scoring system.

Short Analysis - Dividend Score: 6

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

Franklin Electric (FELE) is evaluated based on an 8-criteria system to gauge its dividend performance and stability. It has a mixed performance with a dividend score of 6 out of 8. The dividend yield of FELE is below the industry average, which might not attract yield-focused investors. However, a strong average annual growth rate of approximately 9.9% shows good financial health. The payout ratio is comfortably low, indicating sustainable dividend payments. Earnings and cash flows well-cover the dividends, although the ratio has varied. FELE has consistently paid and increased dividends for over 25 years, showcasing financial stability. However, stock repurchases have been modest, representing a conservative but balanced financial approach.

Insights for Value Investors Seeking Stable Income

For investors focused on long-term growth and financial stability, Franklin Electric (FELE) is a noteworthy option to consider. Despite a lower dividend yield, the company shows strong dividend growth and sustainability. Its consistent dividend history over 25 years suggests reliability. The modest stock repurchases reflect a conservative strategy, but this does not overshadow the overall financial health. Therefore, FELE can be a good investment for those prioritizing long-term value and income stability.

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 evaluates the annual dividend payments relative to the stock's price, measuring income generation potential.

Franklin Electric's (FELE) current dividend yield of 0.9312% underperforms compared to the industry average of 1.57%. FELE has maintained relatively consistent yields, albeit lower than industry averages. While improving dividends ($0.78 to $0.9 from 2022 to 2023) signify growth, the increasing stock price ($79.75 to $96.65 in the same period) causes the yield to lag. Hence, for yield-focused investors, FELE might not seem attractive, but long-term growth prospects remain strong.

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

The Dividend Growth Rate is essential as it indicates the company's ability to increase its dividend payments to shareholders. A growth rate higher than 5% suggests financial health and consistent earnings growth.

Assessing Franklin Electric's (FELE) Dividend Growth Rate over the past 20 years reveals mixed signals. Years like 2005, 2011, 2019 exhibit exceptional growth rates of 22.5806, 14.6623, and 23.9316 respectively. However, there are also years such as 2009 with 1.0101 and 2016 with 3.6458 which suggest minimal growth. Overall, the average dividend growth rate is approximately 9.9031%, which is comfortably above 5%. This indicates Franklin Electric's strong performance in amplifying shareholder returns through dividends, indicating good financial health and a positive trend for long-term investors.

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

Explain the criterion for Franklin Electric (FELE) and why it is important to consider

The average payout ratio refers to the proportion of earnings a company pays to its shareholders in the form of dividends. A lower payout ratio generally indicates that the company is retaining a large portion of its earnings for growth, reinvestment, or buffering against future downturns. It is important because it reveals the sustainability of the dividend payments; if a company is paying out too much of its earnings, it may not be able to maintain its dividend in the event of an economic downturn.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings ensures that the company generates enough profit to maintain or grow the dividend payout to shareholders. It reflects financial stability and profitability.

The earnings per share (EPS) for Franklin Electric (FELE) from 2003 to 2023 shows a positive trend, increasing from $0.7625 in 2003 to $4.1834 in 2023. Correspondingly, the dividend per share also grew from $0.1375 in 2003 to $0.9 in 2023. The ratio of dividends covered by earnings indicates how much of the earnings are being paid out as dividends, with lower ratios generally signifying better coverage. This ratio has consistently remained below 0.45, reaching as low as 0.164 in 2012 and peaking at 0.448 in 2009. Sustaining a ratio below 0.45 is positive, indicating that Franklin Electric has adequate earnings to cover its dividend payments comfortably, which reflects well on its financial stability. This trend signifies good earnings performance relative to dividends, suggesting prudent financial management.

Dividends Well Covered by Cash Flow?

Assessing whether Franklin Electric's (FELE) dividends are well-covered by cash flow involves comparing dividend payouts against free cash flow. Strong coverage suggests sustainability.

The ratio of dividend payout to free cash flow is essential in evaluating the sustainability of dividend payments. For Franklin Electric, coverage ratios varied significantly from 2003 to 2023. Notably, in 2007, the ratio was negative (-0.45), indicating that dividends exceeded free cash flow, which is unsustainable. The same can be said about 2009 and 2019 with ratios of 0.12 and 0.17 respectively. However, other years like 2008 (0.60), 2013 (1.47), and 2022 (0.61) displayed strong coverage, suggesting healthy cash flow generation relative to dividends. Recent values show improvements, which is a positive sign. This trend is somewhat mixed but leans towards good, especially in the last decade, signaling robust cash flow management.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are a measure of a company's commitment to returning value to its shareholders, an indicator of robust financial health, and can attract income-focused investors.

Franklin Electric (FELE) has shown remarkable stability in its dividend payments over the past 20 years. The annual dividend per share has consistently increased from $0.1375 in 2003 to $0.90 in 2023. Notably, there has not been a single instance where the dividend per share dropped by more than 20%. In fact, there were no drops at all – only continual growth, reflecting a strong commitment to shareholder returns and showcasing the company's ability to generate consistent profits. These trends are a positive indicator for income-seeking investors looking for reliable dividend-paying stocks, making Franklin Electric a commendable candidate for long-term investment.

Dividends Paid for Over 25 Years?

To qualify as a reliable dividend-paying stock, a company must have paid dividends for over 25 years. This long-term record signals financial stability and a strong commitment to returning value to shareholders, which makes it a safe investment for dividend-focused investors.

Franklin Electric (FELE) has demonstrated a remarkable history of paying dividends consistently over the last 25 years. From 1998 to 2023, the company has not only maintained but also incrementally increased its dividend per share from $0.0825 in 1998 to $0.90 in 2023. This trend indicates robust financial health and a strong commitment to rewarding shareholders. Annual increases in dividends per share, including notable jumps such as from $0.468 in 2018 to $0.78 in 2022, showcase FELE's growing profitability and prudent financial management. Consequently, this consistent dividend payment trend is highly favorable for investors seeking reliable income and long-term value.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate a company's confidence in its own financial health and can enhance shareholder value by reducing the number of outstanding shares.

From 2003 to 2023, Franklin Electric has engaged in relatively modest share repurchase activity. The number of shares repurchased reliably—only eight times over the past 20 years—along with an average repurchase rate of 11.24%, suggests that the company has taken a more conservative approach to buybacks. This does not necessarily indicate financial weakness, but rather a balanced approach that might prioritize other investment opportunities or financial priorities. Nonetheless, consistency in any form of share repurchase is often welcomed by investors as it demonstrates a commitment to shareholder value.