Last update on 2024-06-27

Engie (GZF.DE) - Dividend Analysis (Final Score: 3/8)

Engie (GZF.DE) dividend analysis scored 3/8, assessing the sustainability and performance of its dividend policy against an 8-criteria system.

Short Analysis - Dividend Score: 3

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

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 crucial measure for investors as it represents the ratio of a company's annual dividend compared to its share price. It indicates how much cash flow is being returned to shareholders in the form of dividends.

Engie's (GZF.DE) current dividend yield of 8.7774% is significantly higher than the industry average of 3.75%. This is generally a signal of a robust cash return to shareholders. Historically, Engie's dividend yield has shown fluctuations, peaking at 12.5833% in 2022 and dropping as low as 2.5325% in 2019. These variances can be influenced by multiple factors including earnings performance, macroeconomic conditions, and changes in the company's dividend policy. However, in most years, Engie's dividend yield has consistently outperformed the industry average. While a high dividend yield can be attractive to income-focused investors, it is also crucial to consider the sustainability of such yields. Many companies with excessively high dividend yields may struggle with long-term payout sustainability, often reflected by declining stock prices — as seen in Engie's case where stock prices have significantly dropped over the years from €40.23 in 2007 to €15.95 in 2023. Investors should analyze whether Engie's current high dividend yield is sustainable given its historical trends and financial health.

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

The Dividend Growth Rate analyses the pace at which a company increases its dividend payments over a period. A growth rate higher than 5% is generally considered healthy and sustainable, demonstrating the company's profitability and commitment to returning value to shareholders.

Analyzing Engie's dividend growth rate over the last 20 years with the values provided, it is evident that the Dividend Per Share ratios fluctuate drastically, including many negative values, and periods where no dividends were paid. The average Dividend Ratio stands at 13.70%, however, this figure is significantly skewed by extreme values such as the 385.71% growth in 2022. The inconsistencies and presence of negative ratios indicate instability in dividend payments. The overall trend does not reflect a consistent growth of dividends. Thus, despite the average suggesting a rate above 5%, the pattern demonstrates volatility, reflecting poorly on the criteria of having a stable growth rate above 5% consistently.

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

A stable and low Average Payout Ratio is crucial, as it reflects the company's ability to pay dividends sustainably. Ideally, it should be below 65%.

The provided data indicates that Engie's average payout ratio over the last 20 years is approximately 107.72%. This value is significantly higher than the optimal threshold of 65%. Historically, Engie has had highly volatile payout ratios, with notable spikes in certain years (e.g., 221.04% in 2012 and 1903.70% in 2022) and even negative values in several years. This trend isn't favorable and highlights potential inconsistencies in earnings relative to dividends. Thus, this criterion is not positively met for Engie, suggesting a potentially unsustainable dividend policy.

Dividends Well Covered by Earnings?

Evaluating whether dividends are well covered by earnings is crucial because it determines the sustainability of dividend payments. If a company's earnings consistently exceed its dividend payments, it indicates financial health and a lower risk of dividend cuts.

Analyzing Engie's dividend coverage ratios over the years, there is a significant fluctuation. The ideal scenario is having a coverage ratio greater than 1, implying earnings fully cover dividends. From 2003 to 2007, no dividends were paid. The ratios from 2008 onwards show inconsistency. In 2008 and 2009, the ratios were below 1, indicating earnings were insufficient to cover dividends. In 2012, despite dividends being equal to the previous years, a drastic EPS drop led to a remarkably high coverage ratio of over 2. This anomaly must be understood as structural, like one-off earnings dips. Years with negative EPS like 2013 and 2016 are particularly concerning, as the ratios fell below zero, signifying unsustainable dividends. Positive coverage ratios from 2017 to 2023 are more comforting but vary significantly, from as low as 0.23 to as high as 19.03. In conclusion, while recent trends show relatively better coverage, evident high volatility indicates underlying earnings instability. Investors should consider these inconsistencies while assessing dividend reliability.

Dividends Well Covered by Cash Flow?

Dividend coverage by cash flow indicates whether a company generates enough cash to cover its dividend payouts. A ratio above 1 signifies robust coverage, while a ratio below 1 implies potential risk.

The historical analysis of Engie's (GZF.DE) free cash flow and dividend payout amount reveals varied performance in terms of dividend coverage by cash flow. Over the 21-year period, several trends emerge: 1. **2003-2008**: Engie’s dividend coverage fluctuated, peaking at around 0.78 in 2006 but 2008 saw a negative coverage (-0.82), indicating that dividends exceeded free cash flow, possibly funding dividends through debt or reserves, a potential red flag. 2. **2009-2016**: The ratios mostly exceeded 1, demonstrating strong coverage. For example, 2009 and 2010 recorded ratios of 1.01 and 1.29, respectively, highlighting periods where cash flows supported dividends comfortably. 3. **2017**: While the dividend coverage ratio was stable around 0.81, indicating steady but cautious coverage. 4. **2018-2019**: The ratio significantly improved, reaching 1.59 and 1.52, suggesting excellent cash flow generations relative to dividend payments during this period. 5. **2020-2023**: Fluctuations were observed again. 2020 saw a notably low 0.23 ratio due to reduced cash flow, indicating a high potential dividend risk. However, 2021 and 2022 showed recovery with coverages of 1.41 and 1.21, respectively, before dropping to 0.70 in 2023. Overall, despite fluctuations, several periods demonstrate strong dividend coverage by cash flow, suggesting Engie generally maintains a balanced approach to managing cash payouts and cash flow. However, the periods of low or negative coverage should be addresses cautiously.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a long period build investor confidence and ensure consistent income, crucial for long-term income-seeking investors.

When assessing Engie's (GZF.DE) dividend stability over the past 20 years, we observe fluctuations particularly between 2008 and 2023. Notably, the dividend per share (DPS) began at EUR 2.06 in 2008 but gradually declined over the years, reaching a low of EUR 0.35 in 2021—a significant drop exceeding 80% from the 2008 peak. However, there has been a recovery trend, with the dividend rising to EUR 1.4 in 2023. Despite some years of significant reductions, no single year recorded a drop exceeding 20%, indicating some level of resilience. This gradual decline, followed by recent recovery, suggests a mixed but somewhat stabilizing trend, crucial for long-term dividend confidence. Income-seeking investors might view the post-2020 dividend rebounds positively but should be cautious about the volatility prior to that period.

Dividends Paid for Over 25 Years?

Whether a company has consistently paid dividends for over 25 years is crucial as it showcases its financial stability and commitment to returning profits to shareholders. This historical performance can be a reliable indicator of future dividend payments.

Examining the data for Engie (GZF.DE) from 2002 to 2023, it appears that the company has not consistently paid dividends for over 25 years. In fact, dividends were first recorded in 2008 with an initial dividend per share of €2.06. While the company has since managed to pay dividends every subsequent year, it does not meet the 25-year criterion yet. Furthermore, the dividend amounts have fluctuated, with notable reductions in certain years, particularly in 2012 when dividends dropped from €1.5 to €1.17. This mixed trend indicates some level of instability in dividend payouts, suggesting that while Engie has a commitment to paying dividends, it has faced financial challenges affecting its dividend policy. Therefore, investors seeking a long uninterrupted history of dividend payments might consider this trend as less favorable.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over an extended period indicate a company's commitment to returning value to shareholders. Consistent buybacks can signal that the management believes the stock is undervalued and that there are excess cash flows available.

Examining the data for Engie (GZF.DE) from 2003 to 2023, it is evident that the company has only repurchased shares reliably in one year, which is 2010. The number of shares outstanding has significantly increased from 903 million in 2003 to 2.42 billion in 2023. This continuous dilution over the years generally indicates that the company has been issuing more shares rather than repurchasing them. The average rate of repurchase over the last 20 years stands at 5.5444, which is relatively low. Hence, based on this analysis, Engie lacks a consistent stock repurchase program, which might be viewed as negative from an investor’s perspective who prefers regular buybacks.