Last update on 2024-06-27

Gentex (GNTX) - Dividend Analysis (Final Score: 6/8)

Detailed dividend analysis of Gentex (GNTX) using an 8-criteria scoring system, achieving a final score of 6/8. Explore performance and stability insights.

Short Analysis - Dividend Score: 6

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

Gentex has shown decent performance on its dividend policy with a score of 6 out of 8 according to our criteria. The company’s dividend yield is lower than the industry average, which might be a downside for income-focused investors. However, Gentex's dividend growth rate has been consistently above 5% for the past 20 years, and it has maintained a healthy payout ratio of around 41.12%, indicating sustainable dividends. Furthermore, its dividends are well covered by earnings and generally supported by cash flow, although there has been some volatility. The company has maintained stable dividends since it began paying, with just a minor dip in 2006. Although Gentex hasn’t reached the 25-year consistent payout mark, it has been quite reliable over the past 20 years. In terms of stock repurchases, the company has maintained a steady approach, which tends to indicate a prudent financial strategy.

Insights for Value Investors Seeking Stable Income

While Gentex’s dividend yield might initially appear less attractive compared to the industry average, the solid growth rate, sustainable payout ratio, and history of stable and well-covered dividends make it worth considering for long-term investors. The company’s sustained financial health and shareholder-friendly policies offer promise. Investors, particularly those focusing on long-term growth rather than immediate income, might find Gentex a good addition to their portfolio.

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

Based on the data provided, Gentex’s (GNTX) current dividend yield of 1.4697% is below the industry average of 2.23%. The dividend yield trend has fluctuated over the past 20 years; the highest yield was recorded at 4.8131% in 2008, whereas the lowest was 0.3397% in 2003. Despite these fluctuations, Gentex has consistently paid dividends annually, with a modest increase over years. Comparatively, the industry average yield has also seen variation but generally tracked lower. This underperformance against the industry average may be concerning for income-focused investors looking for higher yield options. However, one must also consider the strong growth in Gentex’s stock price over the 20-year period (from $11.04 in 2003 to $32.66 in 2023), which might attract investors looking for total return rather than yield alone. It’s essential to balance dividend yield with stock price performance to get a fuller picture of shareholder returns.

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

criterion for Gentex (GNTX) and why it is important to consider

The Dividend Growth Rate is higher than 5% in the last 20 years

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

The average payout ratio indicates the proportion of earnings a company pays to its shareholders in the form of dividends. A lower payout ratio suggests good dividend sustainability and room for growth.

Gentex has maintained an average payout ratio of approximately 41.12% over the past 20 years. This is well below the 65% threshold, indicating healthy dividend sustainability and the company's ability to retain earnings for growth and other opportunities. While there were some spikes, such as the payout ratios of 96.5% in 2008 and 93.7% in 2009, these appear to be outliers. After 2009, the payout ratio stabilized significantly and stayed well within a sustainable range. Hence, the long-term trend in Gentex’s payout ratio is very favorable and reflects prudent financial management.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

Analyzing the data from 2003 to 2023, we observe that Gentex's payout ratio—the percentage of earnings paid to shareholders in dividends—has generally been healthy. The coverage ratios range from 0.1095 to 0.9650, indicating that earnings have more than adequately covered dividend payments over this period. A payout ratio below 1 is good as it means the company is not paying more in dividends than it earns. Recent years show this trend is still positive, with coverage ratios predominantly below 0.5, suggesting that a significant portion of earnings is retained for growth or other uses. However, the coverage ratio did peak near 0.9650 around 2008, likely influenced by the financial crisis, which may have compressed earnings temporarily. Overall, the dividend coverage is robust, making this a positive metric for Gentex.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow refers to the ratio between Free Cash Flow (FCF) and Dividend Payout. It is important because it indicates if a company generates enough cash to cover its dividend payments.

The provided data shows Gentex's Free Cash Flow (FCF) and Dividend PayoutAmount over the years from 2003 to 2023. Looking at the 'Dividend covered by Cashflow' metric, which is the ratio of FCF to dividend payouts, there are a few key points to highlight: 1. **Early Period (2003-2009)**: The ratio was relatively lower, hovering around 0.12-0.81, showing that dividends were roughly covered but with thinner margins and some stress on cash flows particularly in years like 2005 and 2007 where the ratios were around 0.73 and 0.59 respectively. 2. **2010 as an Outlier**: During 2010, the ratio spiked to an astounding 3.12, which indicates the company generated significantly more FCF relative to dividends paid, strongly showcasing exceptional cash flow strength in that year. 3. **Steady Decline and Stabilization (2011-2021)**: Following the 2010 spike, the ratio settled to more moderate levels (ranging 0.25-0.38) suggesting that while dividends were comfortably covered, the margin wasn't exceedingly high. 4. **Recent Recovery (2022-2023)**: More recent years show a slight recovery in the coverage ratio, increasing to around 0.59 in 2022 before slightly falling to 0.31 in 2023. Overall, while Gentex usually covered its dividends with free cash flow, the company's cash flow generation relative to dividends has shown some volatility. These trends indicate some inconsistency but overall responsible dividend policies. However, the latest years show a divided picture – good in 2022 but weaker in 2023, suggesting potential prudence or tighter control might be needed moving forward.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over a long period demonstrates financial health and commitment to returning value to shareholders. Investors often seek companies that have a reliable and steadily growing dividend.

Over the past 20 years, Gentex (GNTX) has shown remarkable stability in its dividend payments. However, in 2006, there was a notable reduction, with the dividend per share dropping from $0.2175 in 2005 to $0.1825 in 2006, a decrease of approximately 16.1%. While this dip is significant, it is still below the 20% threshold set for concern. Since that temporary decrease, Gentex has consistently increased its dividend payouts, demonstrating resilience and a strong commitment to its shareholders. Therefore, this trend can be considered quite positive overall for income-seeking investors, indicating that Gentex values its shareholders' interests and has managed its finances well to support consistent dividend growth with minimal fluctuation.

Dividends Paid for Over 25 Years?

The criterion evaluates if the company has consistently paid dividends for over 25 years. This indicates financial stability and reliability.

Gentex (GNTX) has been paying consistent dividends since 2003. Over a span of 20 years, they have incrementally increased their dividend per share, starting from $0.0375 in 2003 to $0.48 in 2023. While they have a strong track record of 20 years, they fall short of the 25-year mark required to fully meet this criterion. However, the consistent increase in dividend payments over two decades is a good indicator of financial resilience and shareholder value creation.

Reliable Stock Repurchases Over the Past 20 Years?

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

Stock repurchases are a way for a company to return cash to shareholders, similar to dividend payments. They can indicate that the company believes its stock is undervalued and a good investment. Evaluating the consistency and frequency of stock repurchases over a long period, such as 20 years, provides insight into the company’s capital allocation strategy and financial health.