Last update on 2024-06-28

Grenke (GLJ.DE) - Dividend Analysis (Final Score: 5/8)

Analyze Grenke's (GLJ.DE) dividends with an 8-criteria scoring system. Current score: 5/8. Learn about the company's dividend stability and performance.

Short Analysis - Dividend Score: 5

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

The dividend analysis of Grenke (GLJ.DE) on the basis of an 8-criteria scoring system gives it a score of 5, indicating moderate performance in its dividend policy. Key takeaways include: - Lower than industry average dividend yield (1.7964%) - High average annual dividend growth rate but with volatility - Consistent payout ratio below 65%, mostly retaining earnings for reinvestment - Dividend coverage by earnings and cash flow, but with considerable annual fluctuations - Insufficient historical data on dividends being paid for over 25 years, but they have been stable for the past 20 years - Lack of consistent stock repurchases, opting more for reinvestment. In summary, while Grenke exhibits general commitment to returning shareholder value through dividends, its inconsistent dividend and repurchase record, coupled with lower than industry average yields, indicate a cautious outlook.

Insights for Value Investors Seeking Stable Income

For investors prioritizing steady dividend payouts and high yields, Grenke may not be the best option given its performance and volatility. However, for those looking at potential growth and capital appreciation, it might still hold promise given its reinvestment strategies. As always, an in-depth analysis of individual financial circumstances and investment goals is recommended before making a decision.

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?

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price.

The current dividend yield for Grenke (1.7964%) is lower than the industry average (2.43%). This suggests Grenke is paying out relatively less in dividends compared to its industry peers. Historically, Grenke's dividend yield has been quite volatile, with highs like 10.101% in 2008 and lows such as 0.7369% in 2017. Over the past five years, the yield has been under 2% for four out of the five years. While Grenke's stock price has seen significant growth, peaking at 92.25 in 2019, this hasn't translated into consistent high dividend yields. This trend may not be appealing to income-focused investors who prioritize stable and high dividend payouts. On the other hand, investors prioritizing capital appreciation might be less concerned about the lower yield.

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

Dividend Growth Rate refers to the annualized percentage rate of growth that a stock's dividend undergoes over a period. A high Growth Rate is crucial for investors seeking income growth.

The Average Dividend Ratio for Grenke over the past 20 years stands at approximately 20.05%, which is substantially above the 5% threshold. However, a volatile dividend distribution pattern is observed, with extreme values such as 110% in 2020 and -84.52% in 2021, indicating inconsistency. Despite these fluctuations, the general trend shows a high growth rate, which is positive for investors depending on consistent high dividends albeit with some caution necessitated by the volatility.

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

Analyzing the average payout ratio for a company over an extended period provides insights into its dividend sustainability. A payout ratio consistently lower than 65% suggests that the company is retaining enough of its earnings to reinvest in growth, while still rewarding its shareholders.

Grenke's average payout ratio over the last 20 years is approximately 41.63%, which is well below the 65% threshold. This is a positive trend, indicating that the company typically retains a significant portion of its earnings for reinvestment or to weather economic downturns. However, it's worth noting that there have been years, specifically 2008, 2009, 2010, 2011, 2013, 2014, 2020, and even a peak of 100.08% in 2009, where the payout ratio exceeded 65%. This inconsistency might raise concerns about the company's ability to maintain a stable dividend policy during more challenging financial periods. Generally, the trend is good, but those outlier years may necessitate further investigation to understand if they were due to one-off events or signal more systemic issues.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings when the Earnings Per Share (EPS) is significantly higher than the Dividend Per Share (DPS), ensuring the company can sustain its dividend payments without compromising financial stability.

Analyzing the data for Grenke (GLJ.DE) from 2003 to 2023, we observe the coverage of dividends by earnings. Early data points (2003-2007) do not provide sufficient EPS information. The period from 2008 to 2019 shows a healthy coverage ratio, staying below 1 and often around 0.7-0.8, indicating earnings are more than sufficient to cover dividends. However, in 2016 and 2017, the coverage drops sharply to ~0.21, which implies the dividends are higher relative to earnings, potentially risking financial strain. Starting from 2020-2023, we notice mixed signals, with 2020 showing a strong recovery with the ratio climbing back to 0.83 but dropping to a concerning low of ~0.12 in 2021, only to recover partially by 2022 and 2023 with ratios around 0.52 and 0.23 respectively. These trends suggest potential inconsistency in covering dividends, posing a potential risk for dividend sustainability. While the overall trend from 2008-2019 is good, recent years indicate caution.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow assesses the company's ability to pay dividends to shareholders from its free cash flow. A higher ratio indicates more sustainable and well-covered dividends.

Over the span from 2003 to 2023, Grenke (GLJ.DE) shows a variance in how well its dividends are covered by free cash flow. The ratio drastically fluctuates, demonstrating periods of lower ratios or even negative coverage (e.g., -0.463 in 2009, -0.361 in 2013, and -0.153 in 2021), suggesting instances where cash flow was insufficient to cover dividend payouts, indicative of potential financial strain. Conversely, years like 2015 and 2016 present ratios of 2.397 and 6.414, reflecting significantly well-covered dividends due to high free cash flow. These erratic patterns illustrate an inconsistency in dividend coverage, highlighting potential risks for income-focused investors during low coverage periods despite occasional peaks.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Grenke (GLJ.DE) and why it is important to consider

Stability in dividend payments is crucial for income-seeking investors as it ensures a predictable income stream. It particularly appeals to retirees and conservative investors who rely heavily on dividend income to meet regular expenses. Grenke (GLJ.DE)'s historical dividend data over the past 20 years indicates the importance of scrutinizing whether the dividend per share has been consistent or seen significant fluctuations.

Dividends Paid for Over 25 Years?

Having a history of paying dividends for over 25 years is an indicator of a company's financial stability and commitment to returning shareholder value.

Grenke (GLJ.DE) does not meet the criterion of paying dividends for over 25 years. The available data shows dividend payments starting from 2003, covering a span of 21 years up to 2023. However, the company's consistent dividend payments over two decades indicate a strong commitment to returning value to shareholders. Furthermore, the trend of dividends per share has been generally positive, with some fluctuations. Notably, the dividend per share peaked at 1.68 EUR in 2020 before decreasing to 0.45 EUR in 2023. Although Grenke does not fulfill the 25-year criterion, its dividend track record is commendable and reflects financial sturdiness. This is a moderately good trend considering the sustained commitment to paying dividends despite some financial fluctuations.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate a company's efficiency in utilizing its surplus capital. Reliable and consistent repurchases over decades show financial health and shareholder value maximization

Grenke's stock repurchase behavior over the past 20 years shows a less frequent pattern, with significant buyback only in 2005. An average repurchase rate of 0.0517 suggests minimal activity in buybacks. The number of shares has mostly increased or remained stable over the past two decades with only sporadic declines. This indicates that Grenke hasn’t made consistent or significant repurchase commitments, reflecting either strategic capital allocation towards growth opportunities or a conservative approach toward share buybacks. This trend could be viewed negatively if shareholders prioritize regular buybacks as a signal of confidence from management in undervalued stock. Nonetheless, it could suggest that the company is potentially prioritizing reinvestment in core business activities over returning capital to shareholders through buybacks.