Last update on 2024-06-27

Globe Life (GL) - Dividend Analysis (Final Score: 6/8)

Explore the performance and stability of Globe Life (GL) dividend policy, evaluated through an 8-criteria scoring system, revealing a score of 6 out of 8.

Short Analysis - Dividend Score: 6

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

Globe Life (GL) was evaluated using an 8-criteria system to assess its dividend performance and stability, scoring a 6 out of 8. In comparison to the industry, Globe Life's dividend yield is lower (0.7254% against an industry average of 1.73%), making it less attractive for income-focused investors. However, the company's extremely low payout ratio of 10.03% signals a strong capability to maintain dividend payments over time. Its dividends are well-covered by both earnings and free cash flow, pointing to financial sustainability. Globe Life has paid dividends consistently over the past 25 years and possesses a reliable stock repurchase program, demonstrating financial health and a commitment to returning value to shareholders. Nonetheless, its inconsistent dividend growth rate remains a concern for long-term investor confidence.

Insights for Value Investors Seeking Stable Income

While Globe Life's low dividend yield might not appeal to income-seeking investors, its strong payout ratio and consistent dividend payments over two decades provide a certain level of stability and security. Investors looking for a reliable growth stock with the potential for capital gains might find Globe Life a good addition to their portfolio, although those prioritizing high dividend growth may want to explore 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?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is a measure of the income generated by owning a share of the company.

As of 2023, Globe Life (GL)'s current dividend yield stands at 0.7254%, which is significantly lower than the industry average of 1.73%. Over the past 20 years, Globe Life's dividend yield has seen fluctuations, ranging from a high of 1.5436% in 2008 to lows around 0.6504% in 2017. In comparison, the industry average has also experienced variability but generally stayed above 1.0%, with highs reaching 4.76% in 2019. This relatively low dividend yield for Globe Life could be perceived as a downside for income-focused investors who prioritize high yields. Given the straightforward gap between Globe Life's yield and the industry average, it's clear that the stock may not be the best option for investors seeking immediate, high-yield returns. Instead, this pattern suggests that investors may see Globe Life more as a growth stock rather than an income-generating asset. If the stock price continues to appreciate consistently, shareholders may enjoy capital gains, which could partially offset lower dividend income.

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

The Dividend Growth Rate measures how quickly a company's dividend payments increase over a given period. Analyzing this over 20 years helps in assessing the company's stability and its commitment towards returning profits to shareholders long-term.

The analysis for Globe Life (GL) over the last 20 years reveals a rather inconsistent Dividend Growth Rate. While there are significant spikes and dips, a consistent growth rate higher than 5% hasn’t been maintained. Notably, large positive spikes such as 32.667 (2008) and large negative dips like -39.1313 (2009) indicate volatility. Avery Dividend Ratio of 10.35% encapsulates this inconsistency. Over this period, observing stability would be preferable for long-term investment attractiveness; hence, this trend raises cautions.

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

The payout ratio is the proportion of earnings paid out as dividends to shareholders, expressed as a percentage. It's important because it indicates the sustainability of a company's dividend payments.

Over the past 20 years, Globe Life's average payout ratio stands at approximately 10.03%, which is well below the 65% threshold. This extremely low payout ratio suggests that the company retains a large portion of its earnings for reinvestment or other purposes, leaving a relatively small portion for dividend payments. This trend is positive for the sustainability of the dividends because it indicates that Globe Life is not overextending itself to return capital to shareholders. Further, even in the year with the highest payout ratio (2014 at 14.61%), the ratio remained well below the 65% threshold. Therefore, Globe Life's dividends are likely very secure, reducing the risk of potential cuts in the future.

Dividends Well Covered by Earnings?

criterion of dividends being well covered by earnings and why it is important.

When analyzing dividends, one critical criterion to consider is whether dividends are well covered by earnings. This is essentially examined by comparing the Dividend per Share (DPS) to the Earnings per Share (EPS). A higher coverage ratio usually indicates that the company has ample earnings to cover its dividends, which is crucial for the sustainability of dividends even during downturns. Globe Life's EPS and DPS data from 2003 to 2023 shows a strong trend where EPS consistently exceeds DPS. Annual coverage ratios like 2023's 0.0865:1 and 2017's 0.0482:1 indicate that the company retains enough profit after paying dividends, largely maintaining above a 0.1:1 ratio, suggesting prudent and sustainable dividend policies.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow is a measure assessing whether a company's free cash flow adequately covers its dividend payouts. It ensures sustainability and indicates a company's capacity to return cash to shareholders while maintaining liquidity.

The trend shows that Globe Life (GL) has consistently maintained a steady free cash flow over the years, fluctuating around the 0.059 mark in terms of coverage ratio. In 2008, 2016, and 2017, the ratio dropped slightly below 0.05, which might be a subtle warning sign. However, the numbers generally indicate strong coverage— the free cash flow always exceeded the dividend requirement by a significant margin. The yearly average fluctuation ranges between 0.048 and 0.076. Therefore, Globe Life (GL)'s dividends appear to be well covered by its free cash flow, which is positive for shareholder confidence.

Stable Dividends Since the Company Began Paying Dividends?

Describe the importance of stable dividends for companies over two decades.

For Globe Life (GL),) the dividend stability over the past 20 years demonstrates robustness and reliability in its dividend policy. A healthy dividend track record often reassures investors about the company's sustained earnings and financial health.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years

From the provided data, we observe that Globe Life has consistently paid dividends from 1998 through 2023. Although there was a notable drop in the dividend per share from 1998 to 1999, it stabilized and even grew steadily over the years. For instance, in 2000 the dividend per share was 0.16 and it continued to increase, reaching 0.883 by 2023. This exemplary history of consistent dividend payments over 25 years is a strong indicator of the company’s financial health and commitment to returning value to shareholders. The gradual increase in dividends over the years is a positive trend, highlighting the company’s growth and reliable cash flow, which are vital factors for long-term investors. Consequently, Globe Life’s track record in this area is exemplary and indicative of stability and confidence in its financials.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Over the past two decades, Globe Life has shown a strong commitment to repurchasing its shares, which can be viewed as a positive indicator for investors. The number of shares has reduced considerably from 259,468,432 in 2003 to 95,098,474 in 2023, showcasing an average repurchase rate of -4.8629% annually. A consistent repurchase program often implies that the company has a surplus of cash and believes its own stock is undervalued. This strategy not only supports the share price but also enhances EPS by reducing the number of shares outstanding. Such a significant reduction in shares indicates that Globe Life has been consistently able to generate sufficient funds for repurchasing shares, which is generally a good sign for existing shareholders.