Last update on 2024-06-27

Grand City Properties (GYC.DE) - Dividend Analysis (Final Score: 4/8)

Analyze the dividend stability and performance of Grand City Properties (GYC.DE) with an 8-criteria scoring system, scoring 4/8.

Short Analysis - Dividend Score: 4

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

The dividend analysis for Grand City Properties (GYC.DE) reveals some concerns. The company's dividend yield was 0% in 2023, far below the industry average. Over the last 15 years, the dividend growth rate has been highly inconsistent, with massive fluctuations. Despite an average payout ratio well below the 65% threshold, which is good, dividends have not always been well covered by earnings or cash flow, especially in recent years. The company has not demonstrated stable dividends as no dividends were paid in some years, such as 2023. It has also not paid dividends for over 25 years, only starting in 2015. Additionally, Grand City Properties has not consistently repurchased its stock, instead issuing more shares over time, resulting in dilution of existing shares.

Insights for Value Investors Seeking Stable Income

Given the lack of dividend stability, irregular growth rates, and the recent halt in dividends, Grand City Properties (GYC.DE) appears to be a risky choice for income-seeking investors. The inconsistent dividend coverage and dilution of shares are also concerning. Unless significant improvements are made in their dividend policy and financial consistency, it might be wiser for investors to look for more stable dividend-paying stocks with a longer history of reliable payouts.

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 and why it's an important metric.

A dividend yield of 0% indicates that Grand City Properties (GYC.DE) has paid no dividends in 2023, significantly below the industry average of 2.99%. Over the past 20 years, GYC.DE has experienced considerable fluctuations in its dividend yield, with notable highs like 9.08% in 2022 and absolute lows with no dividend distribution for many years prior to 2014. This trend suggests instability in dividend payments, creating unpredictability and potential concerns for income-focused investors. While high peaks might seem appealing, the zero dividend yield in various years, including 2023, can be perceived negatively, especially when consistently compared to the industry averages.

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

The Dividend Growth Rate is a measure of the annualized percentage rate of growth that a stock's dividend undergoes over a period of time. It is a critical factor for investors who are looking for consistent income, as a higher growth rate can indicate a company's robust financial health and its ability to generate steadily increasing income for its shareholders.

Analyzing Grand City Properties' dividend growth rate over the last 15 years (not 20 years, as the data provided starts from 2008), a notable inconsistency is evident. Starting from 2016, there are years with negative dividend per share ratio values (-25.1282 in 2020, -0.0728 in 2021, -100 in 2023) mixed with substantial positive values (25 in 2016 and 173 in 2017), indicating massive volatility. An average dividend ratio of 8.248% could give a superficial impression of growth, but the wild fluctuations imply instability. This pattern is not conducive to be classified under 'higher than 5% sustainable growth' due to negative figures and high volatility.

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

Explaining the importance of Average Payout Ratio lower than 65% in dividend analysis and why it should be considered.

An average payout ratio lower than 65% is considered financially healthy because it indicates that a company retains a substantial portion of its earnings for growth, debt repayment, and other corporate purposes. The payout ratio is calculated as the dividend paid to shareholders divided by the earnings of the company. With an average payout ratio of 14.7369375% over the last 20 years, Grand City Properties (GYC.DE) significantly falls under the 65% threshold, suggesting a conservative and potentially sustainable dividend strategy.This trend is beneficial as it showcases the company's focus on financial stability and growth rather than making high dividend payouts that could jeopardize its balance sheet. Notably, the high payout ratio observed in 2022 seems to be an outlier, possibly resulting from extraordinary circumstances or strategic decisions that deviated from the norm. However, the overall low average indicates a strong policy of balancing between rewarding shareholders and retaining earnings for other productive uses, thereby boosting investor confidence about the firm's future dividends and growth prospects.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

In terms of covering dividends with earnings, Grand City Properties (GYC.DE) shows reasonably good historical performance, but with some fluctuations. Most notably, the years 2022 and 2023 stand out; in 2022 the coverage ratio is quite high at around 91%, indicating robust earnings capable of comfortably covering dividends. However, in 2023, there’s a significant decline, with a coverage ratio turning negative, which is alarming. This suggests that the company may face challenges in maintaining its dividend payments unless there's an improvement in earnings. The overall trend highlights the importance of closely monitoring earning capabilities relative to the company's dividend obligations. The fluctuations between 0% and 91% show that while the company has had periods of strong coverage, it also faces significant risks of under-coverage in certain years.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow criterion and why it is important to consider

For stocks, sufficiently strong cash flow coverage for dividends is a critical factor to assess a sustainable dividend distribution policy. By examining the percentage of free cash flow emitted towards dividend payouts, investors gauge if a company sustains healthy and consistent dividend distributions.

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.

Given the data on dividend payments by Grand City Properties (GYC.DE) for the last 16 years, the dividends per share are as follows: 0 (2008-2014), 0.2 in 2015, 0.25 in 2016, 0.6825 in 2017, 0.511 in 2018, 0.7735 in 2019, 0.8238 in 2020, 0.8232 in 2021, 0.834 in 2022, and 0 in 2023. This trend is concerning because it shows instances of zero dividends at the start and end year, significant fluctuations in dividend amounts, and fails to maintain the 20% stability criterion. Although the dividends have shown an upward trend between 2015 to 2022, the sudden drop to zero in 2023 raises a red flag. Therefore, this volatility in dividend payments makes the stock less attractive to income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is important because it indicates a company's stability and commitment to returning capital to shareholders over time. It builds investor confidence and reflects consistent financial health.

Grand City Properties (GYC.DE) has not paid dividends for over 25 years. The data shows that the company started paying dividends only in 2015. The dividends per share have ranged from 0.2 to 0.834 until 2023, when dividends are zero again. This relatively short dividend payment history and recent halt in dividends may concern investors seeking long-term dividend stability and may indicate financial challenges or changes in dividend policy.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases reflect company confidence and financial stability. They enhance shareholder value by reducing the total number of shares outstanding, potentially increasing the value per share.

The data for Grand City Properties (GYC.DE) shows an inconsistency in share repurchases over the past 20 years. While the company repurchased shares in years such as 2012, 2019, and 2021, the overall trend shows significant increases in the number of shares, particularly between 2013 and 2023. This suggests that the company has been issuing new shares more frequently than repurchasing them, leading to dilution of existing shares. For instance, the number of shares increased from 135.4 million in 2014 to 172.352 million in 2023. This trend reflects a less aggressive buyback program, which might not be favorable for existing shareholders as it dilutes their stakes.