Last update on 2024-06-27

Fifth Third Bancorp (FITB) - Dividend Analysis (Final Score: 6/8)

In-depth dividend analysis of Fifth Third Bancorp (FITB) using an 8-criteria scoring system to evaluate performance and stability; Final Score: 6/8.

Short Analysis - Dividend Score: 6

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

Fifth Third Bancorp's (FITB) dividend analysis gives us both good and not-so-good news. First, they scored 6 out of 8 in the assessment, which is a decent score. Their dividend yield of 3.9432% is notably higher than the industry average of 2.76%, suggesting it's an attractive income source. Yet, big yield variations over 20 years pose some risks. Regarding growth, FITB's average annual growth rate and payout ratio are positive factors. They have a payout ratio of 51.78%, well below the 65% threshold, and their dividends are covered by both earnings and cash flow, despite some anomalies like 2020's pandemic impact. Unfortunately, their dividend instability during the 2008 financial crisis and other economic downturns is a concern, especially for income-focused investors. However, it's reassuring to know they've paid dividends for over 25 years, showcasing their ability to reward shareholders. Lastly, reliable stock repurchases signal management's confidence and commitment to returning capital to shareholders.

Insights for Value Investors Seeking Stable Income

Considering FITB scored 6 out of 8, it's a pretty strong contender, especially if you're drawn to higher-than-average dividend yields. Their history of paying dividends for over 25 years confirms their commitment to shareholders. However, keep in mind the periods of instability and fluctuations, like the drops during the 2008 financial crisis and again in 2022-2023. If you're an investor who can handle some risk and grind through economic downturns for a rewarding dividend income, FITB might be worth your attention. But if you're strictly seeking stable and consistent dividends, you might want to consider other options.

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?

explain the criterion for Fifth Third Bancorp (FITB) and why it isimportant to consider

Dividend yield of 3.9432% is higher than industry average of 2.76%. FITB exhibited notable variations in yield over 20 years, reaching highs like 11.1237% in 2014 and lows of 0.2725% in 2010. Current yield favorably compares, often outperforming industry, suggesting an attractive income source. However, past variations highlight potential risk. Yields inversely correlated with fluctuating stock prices: 2007 yield at 6.7648%, price at $25.13; 2008 yield at 9.0799%, price at $8.26. Steady dividend increases since 2015 with a stabilizing trend post-2018 indicate reasonable confidence in sustainability, despite market volatility.

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

Explain the criterion for Fifth Third Bancorp (FITB) and why it is important to consider

The Dividend Growth Rate is a critical indicator of a company's financial health and long-term sustainability. A consistent growth rate above 5% suggests robust revenue streams and management's commitment to returning value to shareholders.

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

Analyzing the average payout ratio is key to understanding dividend sustainability. Ideally, it should be below 65% to ensure the company isn't overextending its earnings.

Fifth Third Bancorp (FITB) boasts an average payout ratio of 51.78% over the last two decades. This is a positive indicator because it is well within the optimal threshold of 65%, suggesting that FITB has been prudently managing its dividend distributions without putting undue strain on its earnings. Notably, there are some years, such as 2006, 2007, 2012, 2014, 2016, and 2020, where the payout ratio spiked significantly, especially in 2012 (129.03%). Such deviations may be attributed to financial anomalies or strategic shifts, but the overall trend remains favorable, denoting a commitment to maintaining a sustainable dividend policy.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings.

EPS and DPS should be compared to understand if the firm can sustain its dividend payouts comfortably. In the last 20 years, Fifth Third Bancorp has had various trends. EPS mostly followed a recovery trajectory after the 2008 financial crisis, with increases from 2012 onward. For example, 2021 saw an EPS of $3.9448 and a DPS of $2.7961, indicating strong coverage with a ratio of 1.370. However, periods like 2008, when EPS went negative, showed significant issues. From 2019 to 2023, FITB demonstrated better coverage indicating overall improvement except in 2020 due to the pandemic. The general trend hints at good management but with lapses during economic downturns.

Dividends Well Covered by Cash Flow?

To understand how well a firm's dividends are supported by its free cash flow, which indicates sustainability.

Fifth Third Bancorp's free cash flow (FCF) trends have shown considerable volatility, from highs of $7.83B in 2003 to lows as dramatic as -$1.32B in 2007. Despite such volatility, the cash flow has generally increased in recent years with $4.02B noted in 2023 compared to $13M in 2020. When compared to the dividend payout amount, the ratio shows that dividends are generally well covered by free cash flow, with some outstanding anomalies. For example, in 2020 the coverage ratio is an outlier at 66. This suggests that the dividend payout has been sustainable and well-covered by free cash flow on average, which is a positive sign for investors looking for dependable dividend income. The ratio turning negative in 2007 signals prudence due to cash flow issues during that period. Nonetheless, with more recent coverage always above 0.15, the trend is quite reassuring for the sustainability of investor returns through dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are essential for income-focused investors, ensuring a reliable stream of income even amid market volatility.

Examining the dividend per share for Fifth Third Bancorp (FITB) over the past 20 years, several fluctuations are evident. In particular, the significant drop in 2008-2009 from $1.70 to $0.75 and then to $0.04 in 2009 is apparent. This drastic reduction was due to the financial crisis, which led many banks to slash dividends. Despite this, the bank has shown a commendable recovery since 2011, steadily increasing its dividends though not consistently on a year-over-year basis, which can be a concern for pure income-seeking investors. Recently, FITB's dividend per share takes another notable fluctuation during 2022-2023 from $2.7961 to $1.36. However, if we consider the overall trend, FITB has managed to rebuild and substantially increase its dividend payments. Clearly, the criterion of stability is not fully met due to past volatility; thus, this trend may be considered unfavorable for those seeking stable and consistent dividend income.

Dividends Paid for Over 25 Years?

Streak of 25+ years in paying continuous dividends shows consistency, financial health.

Fifth Third Bancorp (FITB) has been consistently paying dividends for over 25 years, a commendable feat that aligns with this criterion. Analyzing the dividend per share trend reveals some volatility, especially during 2008-2009. The dividend fell from $1.7 in 2007 to just $0.04 in 2009, marking a significant drop during the financial crisis. Despite this, the company has shown resilience. It’s noteworthy that the dividend per share has generally increased in recent years, reaching $1.36 in 2023. Thus, FITB’s long-standing dividend payment history reflects its capability to generate shareholder value consistently, although the past volatility suggests underlying vulnerabilities during economic downturns.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Fifth Third Bancorp (FITB) and why it is important to consider

Reliable stock repurchases refer to a company's consistent activity in buying back its own shares over a long period. This criterion is crucial for investors as repurchase programs often signal management's confidence in the company's future prospects and a commitment to returning capital to shareholders. Regular buybacks can support share prices and improve financial metrics like earnings per share (EPS).