Last update on 2024-06-27

Fortive (FTV) - Dividend Analysis (Final Score: 4/8)

Comprehensive analysis of Fortive's (FTV) dividend performance based on an 8-criteria scoring system. Evaluates stability, growth, and payout ratios.

Short Analysis - Dividend Score: 4

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

The dividend analysis for Fortive (FTV) using an 8-criteria scoring system resulted in a score of 4 out of 8, highlighting a mixed performance. Key aspects include Fortive's dividend yield trailing behind the industry average, inconsistent growth rate, remarkably low payout ratio (indicating strong sustainability), recent improvements in dividends well-covered by both earnings and cash flow, but a relatively new history in stable dividend payments (since only 2016). Also, reliable stock repurchases reflect a sporadic pattern.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Fortive (FTV) shows some positive signs, particularly the low payout ratio and consistent dividend coverage by earnings and cash flow. However, the relatively short history of dividend payments and inconsistent buyback patterns might be concerning for long-term, income-focused investors. It's worth keeping an eye on Fortive's performance but considering these factors, it might also be prudent to diversify your investments instead of relying on this stock alone for dividends.

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 the ratio of a company's annual dividend compared to its share price, expressed as a percentage. It is a critical indicator for income-focused investors seeking regular income from dividends as well as for those assessing a company's payout policy.

Over the past 12 years, Fortive's dividend yield has shown consistent growth, especially noteworthy post-2016 when the yield went from 0.417% to 0.3939% in 2023. Comparing it to the industry average, Fortive's current dividend yield of 0.3939% trails behind the industry average of 0.75%. Historically, the industry average yield has fluctuated significantly, spiking at 1.84% in 2019 and dropping as low as 0.28% in 2017. Despite Fortive's lower yield relative to its peers, the upward trajectory in its payouts indicates a positive trend and growing potential for shareholders, supported by its stable stock price ranging from $44.88 in 2016 to $73.63 in 2023. This trend bodes well for long-term income-seeking investors, even if it is less competitive versus other industry players for immediate high-yield returns.

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

The criterion evaluates whether Fortive's dividend growth rate over the last 20 years has exceeded a 5% growth rate. This is vital because it reflects the company's ability to increase shareholder value by providing increasing returns over time.

The data indicates that Fortive's dividend ratio fluctuated significantly over the years. Starting from zero dividends up until 2016, followed by sporadic dividend payments.Finally, with the most current value for 2023. While one strong growth rate in 2016 is notable, the average dividend ratio stands at 3.972758%, which is below the required 5%.Thus, the dividend growth rate is inconsistent, and this trend is unfavorable as it doesn't meet the solid performance standards for continuous shareholder value enhancement.It implies that the company may not sustain long-term dividend growth stability, raising concerns for long-term investors.

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

The dividend payout ratio indicates what percentage of a company's earnings are paid out as dividends to shareholders. A lower payout ratio generally suggests a stronger ability to sustain dividends in the future, as less income is being distributed and more retained for growth.

The average payout ratio for Fortive (FTV) over the given period is approximately 6.29%, which is significantly lower than the 65% threshold. This low payout ratio is a positive sign for dividend sustainability as it indicates that Fortive is distributing a small fraction of its earnings as dividends, retaining more capital for reinvestment.

Dividends Well Covered by Earnings?

Analyze if a company's dividends are supported by its earnings. This indicates if the company has enough profit to cover dividend payouts, which affects financial stability and potential dividend growth.

Examining Fortive's (FTV) dividends covered by earnings from 2012 to 2023, it becomes evident that the ratio of dividends per share covered by earnings per share (EPS) remains at various levels. The coverage ratio statistics show an increase in 2020 and further into 2021 (e.g., 0.1606 in 2021). This trend suggests an improving ability to cover dividends with earnings in recent years. While the earlier years exhibit a lower coverage ratio, the increased EPS to dividend per share ratio in subsequent years reinforces a trend towards a healthier financial standing. Consequently, this coverage trend is positive, illustrating an ongoing enhancement in Fortive's dividend sustainability and financial robustness, albeit the exact numbers are subjectively low, the improvement is a constructive indicator.

Dividends Well Covered by Cash Flow?

This criterion evaluates how well a company's dividends are covered by its free cash flow. It is crucial because it demonstrates the sustainability of dividend payments. High coverage indicates that the company generates sufficient cash to cover its dividends, reducing the risk of dividend cuts.

Analyzing the provided data, Fortive's trend in dividends covered by free cash flow indicates solid dividend coverage in most years. Notably, in 2016 there was a very high payout ratio (approx. 3.03), which likely reflects a one-time event such as a special dividend. Excluding this anomaly, the coverage ratio remains comfortably over 0.05, ensuring dividends are well supported by cash flows. This positive trend reassures investors seeking reliable income streams from Fortive. Overall, this trend is good for dividends sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

An analysis of Fortive's (FTV) dividend payments over the past 20 years reveals an inconsistency because dividends were not paid until 2016. The dividends per share from 2016 to 2023 are as follows: (2016: $0.1872, 2017: $0.2343, 2018: $0.2343, 2019: $0.2343, 2020: $0.2686, 2021: $0.28, 2022: $0.28, 2023: $0.29). Since 2016, Fortive has shown an upward trend in dividend payments, except for 2018 and 2019 where dividends per share remained flat at $0.2343. In 2020, the company increased its dividend by more than 20% over 2019. Although relatively new in paying dividends, Fortive demonstrates a commitment to increasing dividends. Hence, considering the short history, the trend appears stable and positive but lacks the long-term stability some income-focused investors may seek.

Dividends Paid for Over 25 Years?

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

The criterion examines whether Fortive (FTV) has paid dividends for over 25 years. This is important as a long history of dividend payments can signify stability and a shareholder-friendly disposition, indicating a company’s resilience, profitability, and dedication to returning capital to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

A criterion for evaluating the reliability of share repurchases over the past 20 years in the context of dividends is to analyze the consistency and frequency of stock buybacks. Reliable stock repurchases indicate that a company has returned capital to shareholders regularly, which positively distinguishes it in the market. Buybacks reduce the number of shares outstanding, which can increase earnings per share (EPS) and potentially enhance shareholder value. Consistency in buybacks can signal management's confidence in the firm's future and financial health.

Looking at Fortive's (FTV) share repurchase history over the past decades, we notice a mixed trend. Between 2016 and 2023, there were only four reliable years of substantial stock repurchases, which indicates a sporadic approach. For instance, in 2016, 2018, 2019, and 2023, reductions occurred, respectively by 5.6 million, 1.9 million, 14.9 million, and 3.9 million shares. On the contrary, there were years where share numbers increased, protecting capital availability during downturns as hinted in 2022 and deed again likely share-based compensations. Despite having an essence of reliability, the average buyback rate stands at 0.2112 over 20 years, reflecting sporadic minor reductions. Such a pattern can often lead to questions around the management's consistency on capital returns alongside dividends. While some buybacks imply strategic restitution to durable shareholders, such fluctuations raise concerns over the policy's constancy. Hence this criterion evaluates as moderate-performing, hinting room for forge improvements.