Last update on 2024-06-28

Gerresheimer (GXI.DE) - Dividend Analysis (Final Score: 4/8)

Thorough dividend analysis of Gerresheimer (GXI.DE), evaluating performance and stability with an 8-point scoring system. Final score: 4/8.

Short Analysis - Dividend Score: 4

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

The analysis of Gerresheimer (GXI.DE) dividend performance reveals a mixed outlook. The company shows a higher dividend yield than the industry average and maintains a conservative payout ratio below 65%. However, its dividend growth rate is inconsistent and often negative, stretching back over 20 years. Dividend coverage by both earnings and cash flow also presents some concerns, with declining coverage ratios and periods of negative free cash flow. Stability in dividends exists, albeit with some zero payout years, and dividends have been paid for only 15 years, short of the desired 25 years. Moreover, reliable stock repurchase activity hasn't been highlighted.

Insights for Value Investors Seeking Stable Income

Based on this analysis, while Gerresheimer's dividend yield and conservative payout ratio are positive aspects, the inconsistent dividend growth, declining coverage by earnings and cash flow, and short dividend history are important downsides. Potential investors seeking stable and growing dividend income might want to consider if these shortcomings align with their investment goals before proceeding. It's worth keeping an eye on longer-term performance improvements and financial stability.

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 evaluates the annual dividend payments relative to a company's share price, reflecting investment income potential for shareholders.

Gerresheimer (GXI.DE) reports a current dividend yield of 1.3249%, which significantly surpasses the industry average of 0.67%. Historically, Gerresheimer's dividend yield has exhibited fluctuations over the past two decades, ranging from 0% in its IPO years to a peak of 2.0513% in 2008. The company's yield has predominantly remained higher than the industry average, particularly from 2008 onward, except for notable lapses in 2010. Given the stock price trajectory, which climbed from €19.5 in 2008 to €94.35 in 2023, along with consistent dividend payments that reached €1.25 per share in recent years, the higher yield signifies that Gerresheimer offers more attractive returns when compared to industry norms. This trend is favorable, reflecting Gerresheimer's robust dividend policy and strong pricing power as it delivers superior income-generating potential to investors relative to its peers.

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

The Dividend Growth Rate measures the annualized percentage growth of a company's dividend payments over a specific period. It indicates the potential payout increase shareholders can expect.

The dividend growth rate for Gerresheimer (GXI.DE), considering the provided Dividend Per Share Ratio values from 2005 to 2023, shows very inconsistent dividend distributions, including several years with zero dividends or negative growth. Specifically, the ratio has been highly volatile with drastic negative swings like -100% in 2010 and multiple zero-value years. The calculated average dividend ratio over the period stands at approximately -0.11, meaning an overall negative trend. This negative and inconsistent trend would be concerning for potential investors focusing on dividend income, as it suggests unreliable payouts and failed to achieve a steady greater than 5% growth rate annually.

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

The payout ratio measures the proportion of earnings paid out as dividends to shareholders, ideally under 65%.

Gerresheimer has maintained an average payout ratio of approximately 47.36% over the last 20 years, which falls well below the benchmark of 65%. This conservative payout ratio indicates that the company retains a substantial portion of its earnings for reinvestment or debt reduction, reflecting a prudent approach to maintaining financial stability. The high payout ratios in 2008 (278.55%) and 2009 (180.42%) significantly deviate from the company's typical behavior and might have been influenced by extraordinary financial circumstances. Since 2010, the payout ratio has consistently stayed below 50%, suggesting improved profitability and earnings stability. Overall, this is a positive trend for investors considering Gerresheimer's capacity to sustainably support and potentially grow its dividend payouts.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This means that the company is generating enough profit to sustain its dividend payouts without compromising its financial stability. A higher coverage ratio indicates a dividend that is more stable and sustainable over time.

Reviewing the Earnings per Share (EPS) and Dividend per Share (DPS) ratios for Gerresheimer (GXI.DE) over the period from 2005 to 2023, there are some stark fluctuations in how well dividends are covered by earnings. Particularly, in years such as 2007 and 2010, no dividends were paid out possibly due to negative or inadequate earnings. However, in recent years, from 2020 to 2023, while dividends per share remained consistent at 1.25 EUR, the earnings per share have shown a general upward trend, increasing from 2.82 EUR in 2020 to 3.48 EUR in 2023. Despite this, the coverage ratio has actually decreased over these years— from 0.428 in 2020 to around 0.358 in 2023. This suggests that although the earnings are improving, the proportional increase is not substantial enough to foster a higher coverage ratio. Such a trend may prompt a deeper investigation into whether this pattern is due to increased dividend payout promises or other financial obligations affecting the earnings. Therefore, while the company displays the ability to pay dividends consistently, the declining coverage ratio is a concerning trend for long-term dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the company generates enough free cash flow to comfortably pay out its dividends. This ensures that the dividend payments are sustainable and do not compromise the company's liquidity. Evaluating this criterion involves examining the ratio of free cash flow to dividend payout over time.

Looking at Gerresheimer's free cashflow (FCF) and dividend payout over the years, the trend exhibits varying degrees of coverage, with some concerning periods. For instance, their FCF of -33,700,000 in 2023 evidences a negative cash flow, making dividend coverage infeasible (-0.0). The same applies for 2017 where the FCF coverage was robust at 2.00+, indicative of strong cash generation capabilities. Overall, the data presents a mix pre-ecessene, and healthy payouts during profitable periods. Problematically, the negative iterations suggest reliance on alternative funding for dividend disbursement during lean cash flow years like 2022 and 2023, overall, it's moderatly bad

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years refers to the consistency of dividend payouts without any significant reductions. Stability in dividend payments is crucial for income-seeking investors as it assures reliable cash flow.

The data indicates that Gerresheimer has shown a varied performance in terms of dividend payouts over the last 20 years. The dividend per share (DPS) payments from 2005 to 2023 show that there were some years where dividends were not paid at all, particularly from 2005 to 2007 and again in 2010. This might be attributed to business restructuring, financial reinvestments, or unfavourable economic conditions. The years where dividends were paid exhibit an increasing trend without any drastic drops (the maximum single year drop was below 20%), which is a positive aspect. The DPS has progressively increased from €0.40 in 2008 up to €1.25 in 2022 and 2023. The absence of a drop by more than 20% per annum over this extended period signals robustness and increasing shareholder trust. However, the years with zero payouts need consideration, impacting long-term stability.

Dividends Paid for Over 25 Years?

Why is the criterion of paying dividends for over 25 years significant for Gerresheimer (GXI.DE)?

Analyzing the data provided, it is clear that Gerresheimer has a limited history of dividend payments, starting only in 2008. While there are some fluctuations early on, with a notable non-payment in 2010, overall, the dividends have shown consistent growth. However, since the company has only been paying dividends for 15 years, it falls short of the 25-year criterion. This duration, though shorter, does reflect a commitment to returning value to shareholders, but it does not yet meet the long-term consistency benchmark.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Gerresheimer (GXI.DE) and why it is important to consider

Share repurchases are an essential criterion for investors because they illustrate the company's strategy in managing its cash reserves. Effective stock repurchases can signal to the market that a company believes its shares are undervalued, which can create buying interest and drive up the stock price. Alternatively, a lack of stock repurchase activity can signal managerial caution about future cash flows or a focus on other growth investments.