Last update on 2024-06-27

FMC (FMC) - Dividend Analysis (Final Score: 6/8)

Analyze the dividend performance and stability of FMC (FMC) with our detailed 8-criteria scoring system. Final dividend score: 6/8.

Short Analysis - Dividend Score: 6

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

FMC Corporation’s dividend analysis is based on an 8-criteria scoring system, resulting in a total dividend score of 6. The key points include: a current dividend yield of 3.6796%, surpassing the industry average of 12.48%; an average annual growth rate of 10.85%, with considerable historical volatility; and an average payout ratio less than 65%, suggesting dividend sustainability. While dividends are covered by earnings, fluctuating free cash flow coverage poses concern. The company has raised dividends from $0 in the early 2000s to $2.32 in 2023, although it lacked a 25-year uninterrupted dividend payment history. Lastly, reliable stock repurchases over two decades enhance the financial health picture.

Insights for Value Investors Seeking Stable Income

FMC shows promising aspects such as a higher-than-industry-average yield and a solid average dividend growth rate. However, the inconsistency in free cash flow coverage, mixed history of dividend payments, and historical volatility should caution risk-averse investors. For those seeking stability and consistent payouts, carefully monitor FMC’s financial health. For risk-tolerant investors, there could be potential specially if issues leading to volatility are resolved.

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 measure of the income generated by a stock based on its current price. It is calculated using the formula: dividend per share divided by the stock price. It allows investors to see how much cash flow they can expect in relation to the price of the stock.

FMC's dividend yield stands at 3.6796%. Over the past two decades, the yield has steadily increased from a mere 0% in the early 2000s to its current high level. Notably, this yield surpasses the current industry average of 12.48%, which is unusual and could indicate either an industry anomaly or potential risk in FMC's current valuation, as high yields can sometimes signal underlying problems with stock price depreciation. Nevertheless, the positive upward trend in yield for FMC could attract yield-seeking investors, though they should investigate reasons behind this exceptional current yield.

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

A consistent Dividend Growth Rate (DGR) above 5% is considered robust and indicates that the company is reliably returning value to its shareholders, fostering investor confidence.

Examining FMC Corporation's dividend per share ratios from 2003 to 2023, we observe considerable volatility. Specifically, there are multiple years (e.g., 2004, 2005, 2006, 2010, 2012, 2016) where the dividend growth rate is either zero or abnormally high values are noticed due to fluctuations, contributing to an inconsistent trend. The highly negative ratio in 2003 (-99.9995) is particularly concerning and skews the average. The average dividend ratio stands at 10.85%, which surpasses the target growth rate of 5%. However, given the extreme fluctuations and periods of zero dividends, the consistency and reliability in the context of long-term growth are questionable. Therefore, while the average growth rate on paper is excellent, the instability in annual performance could be perceived negatively by conservative investors seeking stability.

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

average payout ratio

Calculated by dividing dividends paid by net income, the payout ratio is a key indicator of a company's dividend sustainability. An average percentage that is lower than 65% suggests that the company has room to grow its dividend and can comfortably cover it through its earnings.

Dividends Well Covered by Earnings?

Explain the criterion for FMC (FMC) and why it is important to consider

Earnings per Share (EPS) represents the portion of a company's profit allocated to each share of common stock, while Dividend per Share (DPS) is the total dividends paid out per share. This criterion examines whether the dividends paid are well covered by the earnings, ensuring sustainability. A company consistently paying more in dividends than it earns can signal potential financial stress overall or a weak financial position.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

For FMC (FMC), assessing whether dividends are well covered by free cash flow is crucial because this indicates the company's ability to sustain dividend payments without jeopardizing its financial health. Evaluating the trend in the ratio of free cash flow to dividend payout over the years is essential. In the dataset provided, FMC's free cash flow coverage has varied widely. For instance, in 2013, the ratio was 0.689, indicating strong coverage, while in 2015, it was negative, suggesting inadequate coverage. The recent trend from 2019 to 2023 reveals fluctuations, with 2023 showing a negative coverage ratio of -0.558. Despite high coverage in some years, the inconsistency and the negative values in 2023 and 2015 pose a concern regarding the sustainability of dividend payments. Sustained negative cash flow coverage implies potential difficulty in maintaining dividend payouts without incurring additional debt or depleting cash reserves.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividends over the past two decades shows sustained financial health and reliability of a company, providing reassurance to income-seeking investors.

Examining FMC's dividend per share over the past 20 years, it can be observed that dividends have generally trended upwards, rising from $0 in the early 2000s to $2.32 in 2023. There were minor fluctuations, and one particular instance appears where dividends did not drop by over 20% annually. This suggests that, overall, FMC has provided relatively stable dividend growth, which is a positive indicator for investors relying on consistent income. However, no specific year had a drop that exceeded 20%, reinforcing the stability FMC offers to shareholders.

Dividends Paid for Over 25 Years?

Analyze whether FMC has paid consistent dividends for over 25 years and explain the importance of a stable dividend payment history as it suggest a company's financial health and stability.

The company has a mixed track record of dividend payments over the past 25 years. For the years from 1998-2001, 2003, and 2005-2010, the company either did not pay dividends or the records are missing (reflected as 0). FMC has been more consistent in paying dividends from 2011 onwards. Although there have been dividends paid in more recent years and even an increasing trend in the amount paid per share, the company's earlier inconsistency makes it difficult to say that dividends have been paid for over 25 years uninterrupted. This inconsistency can be seen as a negative sign, especially for long-term dividend-seeking investors, but the improving trend in the more recent decade is a positive development.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for FMC (FMC) and why it is important to consider

The concept of reliable stock repurchases refers to a company's consistent buyback of its own shares over a significant period, such as 20 years. This reflects solid financial health and confidence in the business's future profitability. Share buybacks often lead to an increase in earnings per share (EPS) and can be a signal to investors that the company believes its stock is undervalued. Yet, it's essential to examine the sustainability and periodicity of such repurchases to assess their impact fully.