Last update on 2024-06-27

Hanesbrands (HBI) - Dividend Analysis (Final Score: 4/8)

Evaluate Hanesbrands' (HBI) dividend policy performance and stability using an 8-criteria scoring system, resulting in a score of 4 out of 8.

Short Analysis - Dividend Score: 4

We're running Hanesbrands (HBI) 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?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is an important measure for investors to gauge the return on their investment from dividends alone.

Hanesbrands (HBI) has seen some fluctuations in its dividend yield over the past 20 years. Notably, there were no dividends paid until 2013, when the yield was 0.8538%. The yield steadily increased to 4.7885% in 2018, and then significantly spiked to 9.434% in 2022, only to drop back to 0% in 2023. Comparatively, the industry average hovers around 2.3%, peaking at 3.62% in 2008 and 2.67% in 2022. Although HBI showed moments of higher performance, particularly in 2022 with a yield more than three times the industry average, the inconsistency and the decline to 0% in 2023 raise concerns. Investors should be cautious, as the lack of dividends in 2023 could signal potential instability or strategic reallocation of funds. Overall, this trend is problematic given the volatility and recent suspension of dividends, which may deter dividend-focused investors.

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

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth of a company's dividend. A higher DGR reflects confidence in the company's financial stability.

For Hanesbrands (HBI), the Dividend Per Share (DPS) data covering years from 2003 to 2023 indicates irregular patterns. The years displayed a commencement of dividends in 2014 with a significant DPS ratio of 100%, followed by fluctuations and eventually a -100% in 2023. Given these inconsistencies and the average dividend ratio of approximately 3.8%, it is evident that Hanesbrands does not meet the criterion of a DGR higher than 5% over the past 20 years. This erratic behavior raises questions about the company's ability to sustain a growing dividend payout policy, which could be unattractive for dividend investors.

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

The average payout ratio measures the percentage of earnings paid to shareholders in dividends. It is important because a lower payout ratio suggests a company retains more earnings for growth.

The average payout ratio for Hanesbrands (HBI) over the past 20 years is approximately 18.07%, which is significantly lower than the 65% threshold. This indicates that HBI has maintained a conservative approach to dividend payouts, preferring to retain earnings for reinvestment and growth opportunities. However, it should be noted that the trend includes some anomalies, notably the extraordinarily high payout ratio in 2017 and 2021, and the negative ratios in 2020 and 2023, which could indicate financial distress or unsustainable payout levels during those years. Overall, the low average payout ratio is a positive sign, suggesting that dividends are well-covered by earnings and there is potential for future growth.

Dividends Well Covered by Earnings?

Explain the criterion for Hanesbrands (HBI) and why it is important to consider

Earnings per Share (EPS) ideally should cover dividends per share to ensure the company is generating enough profit to sustain its dividend payouts. This criterion is essential because it indicates whether the profits are sufficient to return value to shareholders without eroding the firm's financial stability.

Dividends Well Covered by Cash Flow?

The Dividend Coverage Ratio measures the ability of a company to cover its dividend payouts with its free cash flow. It is important as a higher ratio indicates a safer dividend, while a lower ratio may signal potential issues in sustaining dividend payments.

Upon evaluating the dividend coverage ratio for Hanesbrands (HBI) over the years, spontaneous interesting trends emerge. Before 2013, Hanesbrands did not pay any dividends. From 2013 onward, we note an initial full payment coverage scenario ('2013': 0.1085), which means only 10.85% of FCF was used for dividend payout. In 2015, HBI utilises nearly 126.39% covering its dividends derived from Free Cash Flow alone, which suggests that the company had some year-specific one-time huge expenditure due to which free cash flow dropped substantially losing its ability to cover dividends and signaling a bigger risk of cashflow mismatch in coming periods. However, from 2014 HBI improved their coverage figures, optimally utilising around the desired threshold (~30%-40%) something closer to 0.532 in 2020. Specifically, attention must be drawn to the free cashflow of 2019 and dividend payout - 2020 representing a 53.3% coverage, illustrating HBI retained sizable amount for internal growth indicated a financially stabilised period head of pandemic influenced 2021. Despite the unusual pattern, the significant lower negative figure for 2021 (-0.3647) primarily relying on more borrowing could forewarn potential troubles in non-short-term liquidity leading to zero cash dividends paid toward 2023. The conditional descent demonstrated reports conflict and the overall trend could establish a mixed bag of financial health suggesting longtime accuracy.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are critical as they provide a reliable income stream to investors, indicating financial health and management confidence in the company's prospects.

Hanesbrands (HBI) has demonstrated a notable pattern in its dividend payments over the past 20 years. From 2003 to 2012, the company did not pay any dividends, which raises questions about its dividend policy during that period. The company initiated dividend payments in 2013 with a modest $0.15 per share, progressively increasing to $0.60 by 2017. This upward trend speaks volumes about its financial stability and commitment to returning value to shareholders. However, a cause for concern is the complete cessation of dividends in 2023, indicating a significant dip from $0.60 per share to $0. Consequently, the company's dividend policy has been inconsistent. The recent halt may suggest potential financial distress or a shift in strategic focus. This volatility does not bode well for income-seeking investors who rely on steady dividends. To sum up, despite the growth in prior years, the complete dividend cut in 2023 significantly undermines the company's reliability in providing consistent dividend income.

Dividends Paid for Over 25 Years?

Importance of consistent dividend payments and their implication for investors.

The analysis of Hanesbrands (HBI)'s dividend history reveals that the company has not paid dividends for over 25 years. Starting from 2013, the company initiated dividend payments, reaching a peak of $0.6 per share annually from 2017 to 2022. However, in 2023, the company ceased dividend payments, which could signal potential financial stress or a strategic shift. This inconsistency in the dividend payments history may be perceived negatively by long-term income-focused investors who prioritize stability and reliability in dividend income.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Analyzing the data, we note the shares outstanding from 2003 to 2023 with specific focus on the trend. A reliable stock repurchase strategy indicates strong capital management and confidence in long-term growth, signaling a shareholder-friendly approach. The years identified with significant repurchase activity include 2008, 2015, 2016, 2017, 2018, 2020, 2021, and 2022.