Last update on 2024-06-28

Power Assets Holdings (HEH.F) - Dividend Analysis (Final Score: 4/8)

Explore the dividend analysis of Power Assets Holdings (HEH.F) scored on 8 criteria, highlighting performance, stability, and insights for income-focused investors.

Short Analysis - Dividend Score: 4

We're running Power Assets Holdings (HEH.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis evaluates Power Assets Holdings (HEH.F) using an 8-criteria scoring system, resulting in a score of 4 out of 8. The analysis reveals a significantly high dividend yield compared to the industry average, consistent though volatile dividend growth rate, a concerningly high average payout ratio, occasional but not consistent coverage of dividends by earnings, and fluctuating cash flow coverage. The stability of dividend payments is generally good despite significant fluctuations in certain years. The company has a history of paying dividends for over 25 years but shows mixed results in stock repurchase consistency.

Insights for Value Investors Seeking Stable Income

Given the strengths and weaknesses identified in the analysis, it would be prudent for investors to approach with cautious optimism. The high dividend yield and long history of dividend payments are attractive, but the high payout ratio and inconsistent EPS and cash flow coverage pose risks. Investors should consider these factors and possibly seek more stable alternatives if risk-averse.

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?

Criterion is the dividend yield and its comparison to the industry average.

Power Assets Holdings (HEH.F) exhibits a dividend yield of 6.2721%, which is markedly above the industry average of 3.02%. This trend indicates a robust yield relative to peers, positioning Power Assets Holdings as an attractive option for income-focused investors. Historical data reveal the firm has consistently outperformed the industry in annual dividend yield across the past 20 years. Such a trend highlights strong financial health, consistent dividend payments notwithstanding two outliers in 2017 and 2018 characterized by dramatic spikes to 22.3684% and 16.5929%, respectively. This outlier behavior may warrant further examination but does not detract from the company's overall stability evidenced by subsequent normalizations and continued higher-than-average yields.

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

The Dividend Growth Rate is important as it shows the company's ability to consistently increase dividends over time, reflecting its financial health and earning growth.

The average dividend growth rate of Power Assets Holdings over the last 20 years is 27.54%. This is significantly higher than the benchmark of 5%, implying an overall positive trend in dividend payments. However, it's important to note that there are years with negative growth and zero values, indicating some periods of volatility and inconsistency. While the high average growth rate is promising, potential investors should be cautious of the fluctuations observed in certain years.

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

Average Payout Ratio and why it is important to consider

Examining the 20-year trend of Power Assets Holdings' payout ratio reveals an average significantly above 65%, standing at approximately 91.67%. A payout ratio over 100% or consistently high implies that the company is distributing more to shareholders than it earns, relying on reserves or debt, which may indicate unsustainable practices. Although there were years (such as 2006, 2009-2011) where the payout ratio was comfortably below the threshold, the alarming spikes in years like 2017 and 2018, where it soared above 300%, suggest potential financial strain. This irregularity signifies that Power Assets Holdings might face challenges in maintaining a balanced approach between rewarding shareholders and sustaining investment for growth. A more consistent and lower average payout ratio would be preferable to ensure long-term financial health and stability, making this trend not particularly favorable for dividend sustainability.

Dividends Well Covered by Earnings?

Dividends are considered well covered by earnings when the company's Earnings Per Share (EPS) is higher than the Dividend Per Share (DPS). This indicates that the firm generates enough profit to meet its dividend obligations. A higher ratio implies stronger financial health and sustainability for the payments, offering more security for dividend investors.

From the data, in several years such as 2007, 2014, and 2018, Power Assets Holdings had an EPS lower than its DPS, which is a negative sign as it implies that the dividends were not fully covered by the earnings. In 2014, particularly, the coverage ratio was extremely low (0.0897), which could either indicate an anomalous situation or an unsustainable dividend policy for that year. However, in other years like 2017 and 2018, the company showed a better balance of EPS to DPS ratios, 3.725 and 2.459 respectively, which reflects strong financial health. Recent years like 2021 suggest that dividends are well-covered (0.980). Nonetheless, in 2022, with a ratio of 1.065, the dividends were covered quite well by the earnings. In conclusion, while there are some years with red flags, the overall trend of EPS to DPS over the period shows more positive than negative signs.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the company generates enough free cash flow to cover its dividend payouts. This is important as it indicates the sustainability of dividend payments.

From year 2008 to 2023, we see that Power Assets Holdings has fluctuating free cash flow, yet steadily high dividend payout amounts. In particular, the years 2014 to 2019 show coverage ratios well above 1, peaking at over 29 in 2017. This signifies that the cash flow was multiple times sufficient to cover the dividend payouts, underscoring a robust dividend policy during those years. Recent years like 2020 to 2023 show a reduction in free cash flow relative to dividends, with a decreasing coverage ratio but still above 1. While the trend is good overall, the declining cash flow in more recent years raises caution about future dividend sustainability if the trend continues.

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.

Power Assets Holdings exhibits a relatively stable dividend payout over the past two decades, albeit with some fluctuations. There are some significant aberrations, especially the surge to 14.52 in 2017 and a subsequent drop to 8.8 in 2018. This kind of drastic fluctuation should raise eyebrows, for in 2017 the dividend per share jumped almost 5 times compared to the average. Despite this erratic behavior around these years, overall, the company manages to sustain the dividends above the threshold after correction. In normalizing these anomalies, it can be argued that Power Assets Holdings has managed to maintain a certain level of consistency in its payouts. Thus, it's of moderate stability but the drastic surges and drops might concern cautious-income seeking investors.

Dividends Paid for Over 25 Years?

Explain the criterion for Power Assets Holdings (HEH.F) and why it is important to consider

Dividends being paid for over 25 years signals the company's financial stability and commitment to returning value to shareholders. It's a crucial indicator that suggests the company has a mature business model with consistent cash flows

Reliable Stock Repurchases Over the Past 20 Years?

The criterion of reliable stock repurchases over the past 20 years evaluates the consistency and regularity of a company's stock buyback programs, which can indicate financial health, confidence in the company's future, and commitment to returning value to shareholders.

When examining Power Assets Holdings (HEH.F), the repurchase activity over the past 20 years shows mixed results. There were notably repurchases only in the years 2008, 2022, and 2023; in many other years, the number of shares remained unchanged. This suggests irregularity in the buyback program. The average repurchase rate of -5.0017 further implies a reduction, but without steady repurchase actions, this leans toward an unreliable trend. Although buybacks have generally decreased the number of total shares from 2007 to 2008 and then again in 2022 to 2023, the company's approach lacks the systematic regularity typically valued by investors for monitoring consistent share repurchase policy. This kind of sporadic action may indicate reactionary rather than a planned, consistent return of value to shareholders, which could be interpreted negatively by the market.