Last update on 2024-06-28

Heineken (HEIA.AS) - Dividend Analysis (Final Score: 7/8)

Discover Heineken's (HEIA.AS) dividend strength with an impressive score of 7/8. Explore the detailed criteria of its performance and stability analysis.

Short Analysis - Dividend Score: 7

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

The dividend analysis of Heineken involves evaluating their performance and stability against an 8-criteria system, securing a score of 7. Their current dividend yield of 2.0883% is slightly above the industry average of 2.06%, indicating a favorable trend. The company's average annual dividend growth rate has been higher than the 5% threshold despite some volatility, demonstrating strong financial health. However, the average payout ratio has shown extreme fluctuation, specifically a massive negative value in 2020, and there are missing records for several years. Recent earnings coverage shows improvement but remains below the ideal ratio of 1.0 or higher. Cash flow analysis post-2017 shows good coverage except during the pandemic year 2020. The stability of dividends is reflected in not cutting more than 20% despite economic downturns, and they have consistently paid dividends for 23 years. Stock repurchases have been inconsistent over the last 20 years, reflecting a mixed capital allocation strategy.

Insights for Value Investors Seeking Stable Income

Heineken's dividend performance indicates a strong yield and good dividend growth rate, making it an alluring option for investors seeking income. However, fluctuating payout ratios and inconsistent earnings coverage raise concerns about long-term sustainability. Despite their resilience during economic downturns, further insight into their capital allocation approach related to stock repurchases is needed. Investors looking for stable returns might consider adding Heineken to their watch list, but should conduct deeper research into their financials and broader economic conditions before committing.

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 measures how much a company pays out in dividends each year relative to its stock price.

Heineken's (HEIA.AS) current dividend yield of 2.0883% is marginally above the industry average of 2.06%. Historically, Heineken's dividend yield has fluctuated significantly, but the current trend shows an alignment with the industry metrics, reflecting a healthy payout ratio. This higher yield is favorable for investors seeking income, especially given that it outperforms the industry average. Notably, the dividend yield has seen peaks, such as 8.9619% in 2005, suggesting that there can be occasional spikes based on market and operational conditions. Consequently, the present trend indicates a more stable and investor-friendly distribution strategy, which is positive for income-focused investors.

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

The Dividend Growth Rate measures the annualized percentage rate of growth in a company's dividend payments per share over a specified period. A rate higher than 5% is often considered a positive indicator of financial health.

Over the past 20 years, Heineken's (HEIA.AS) dividend payments per share demonstrate significant volatility with an average dividend ratio of approximately 29.35%. Despite several years of negative growth, particularly in 2020 and 2021, which could be attributed to the disruption caused by the COVID-19 pandemic, the consistent overall growth trend points to a favorable trajectory. This growth average considerably exceeds the 5% threshold, indicating robust financial health. However, the sharp fluctuations necessitate closer scrutiny of Heineken's earnings stability and broader economic conditions. Overall, the trend in the 20-year dividend growth rate is good for Heineken.

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

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

Interpreting historical payout ratios for Heineken: {'year': {'values': ['2003', '2004', '2005', '2006', '2007', '2008', '2009', '2010', '2011', '2012', '2013', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']}, 'payoutRatio': {values: [0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 0, 40.0754, 45.5431, 70.4468, -293.4537, 16.9744, 31.3318, 0]}Average Payout Ratio: -4.242009523809524Here we observe an omissional of payout ratio records for many years, extreme fluctuations and a drastic negative value in 2020

Dividends Well Covered by Earnings?

Dividends should ideally be well covered by the earnings to ensure the sustainability of the dividend payments. This means the Earnings per Share (EPS) should be significantly higher than the Dividend per Share (DPS).

The coverage ratio (EPS divided by DPS) for Heineken (HEIA.AS) in recent years has been volatile. Notably, the ratio was -2.93 in 2020, indicating that earnings were negative and unable to cover the dividend. The ratio improved significantly in 2021 to 0.17, and further to 0.31 in 2022, showing a positive trend but still below a healthy coverage ratio of 1.0 or higher. These figures suggest that while Heineken is making strides in covering its dividends with its earnings, more improvements are needed to ensure dividend sustainability.

Dividends Well Covered by Cash Flow?

Analyzing if Heineken's dividends are well-covered by cash flow means assessing whether the company generates sufficient free cash flow to cover its dividend payouts. It's important as it indicates financial stability and sustainability.

From 2017 onward, Heineken's dividend payout ratio (dividend covered by cash flow) fluctuated, with a high of approximately 76.15% in 2023 and a low of 30.80% in 2021. For most years, the ratio remained under 50%, indicating good coverage. However, the drop in 2020 (30.80%) due to reduced cash flow (COVID-19 impact) and the recovery in subsequent years elucidate the firm's resilience and capacity to maintain dividend payouts even in trying times. Overall, the trend is positive with strong coverage post-pandemic, reflecting prudent management.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are crucial for income-seeking investors, as they rely on consistent and reliable income from their investments.

Examining Heineken's dividend per share data for the last 20 years, it's evident that while there have been fluctuations, the dividends did not drop by more than 20% in any given year. For instance, while the dividends experienced a dip during the 2008 financial crisis (from 1.04 in 2007 to 1.14 in 2008, and further down to 0.59 in 2009), the decrease was not more than 20%. This pattern holds true even during the COVID-19 pandemic, where the dividend dropped from 2.66 in 2019 to 1.04 in 2020. The consistency in Heineken's dividend payouts underscores the resilience of its business model. For income-seeking investors, the absence of any dramatic cuts is a solid indicator of the company's commitment to shareholder returns. Hence, based on the data, Heineken's dividend trend is considered good for this criterion, offering a stable and reliable income stream over the years.

Dividends Paid for Over 25 Years?

Determining whether a company has paid dividends for over 25 years helps to establish its credibility, financial health, and commitment to returning profits to shareholders. It's an essential criterion for income-focused investors seeking reliable and stable returns.

Heineken has consistently paid dividends since at least 2001, demonstrating a strong commitment to returning profits to shareholders. The data shows dividend payouts spanning 23 consecutive years, just short of the 25-year mark. Nevertheless, this trend is generally favorable, indicating stable financial health and strong cash flows over the long term. Such consistency is a reassuring indicator for long-term investors looking for dependable income streams.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate the company's positive cash flow and a commitment to return value to shareholders. It reflects financial stability and effective capital management.

Over the past 20 years, Heineken shows a mixed record of stock repurchases. In specific years—2008, 2018, 2022, and 2023—the repurchase activity appears cogent. A notable drop in share numbers around these years points to either repurchases or other corporate actions. Given that Heineken has had an average repurchase value of -9.953 over these 20 years, this trend signifies some buyback activity but does not establish a strong, consistent program. Periods with zero shares indicate less emphasis on repurchases, possibly redirected funds towards other investments, debt repayment, or operational needs. Overall, this inconsistency can be viewed neutrally, needing deeper insight into their capital allocation strategy.