Last update on 2024-06-27

Hochtief (HOT.DE) - Dividend Analysis (Final Score: 6/8)

Explore Hochtief's dividend policy analysis — high yields, growth rates, and payout ratios reviewed for investor insights.

Short Analysis - Dividend Score: 6

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

The dividend analysis of Hochtief (HOT.DE) based on an 8-criteria scoring system shows a mixed picture. They have a strong dividend yield of 3.988%, higher than the industry average of 2.27%, implying better income returns. Despite a positive average annual dividend growth rate of 13.51%, there have been significant fluctuations, including negative growth years, making the growth rate somewhat unstable. With an average payout ratio of 39.70%, Hochtief generally maintains a sustainable payout policy, though there are anomalies in certain years. Dividend coverage by earnings and cash flow often falls below the ideal, raising concerns about the sustainability of their dividends. Their history of dividend payments is inconsistent, with notable volatility and interruptions. Hochtief has not met the 'dividends paid over 25 years' criterion but shows a positive long-term trend. Reliable stock repurchases have been noted over the past 20 years, indicating a trend of returning capital to shareholders despite a few periods of increased shares. Overall, the analysis gives them a Dividend Score of 6/8.

Insights for Value Investors Seeking Stable Income

While Hochtief (HOT.DE) presents some strengths, such as a high dividend yield and a relatively low payout ratio, there are significant concerns about the consistency and sustainability of their dividends. The fluctuations in dividend growth and dividend coverage signal potential risks. If you are looking for high-income returns, Hochtief could be appealing, but if stability and predictability are your priorities, there may be better options. Further in-depth analysis and continuous monitoring are recommended for a well-informed investment decision.

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 reflects the dividend income as a percentage of the stock price. A higher yield suggests a greater income return on the investment and indicates that the company is distributing a higher portion of its profits to shareholders.

Hochtief's dividend yield of 3.988% is significantly higher than the industry average of 2.27%. This trend is a positive indicator for income-focused investors as it suggests that Hochtief is providing a higher income return compared to its peers. Reviewing the last 20 years, Hochtief's dividend yield has demonstrated variability, ranging from as low as 0% in 2012 to a peak of 7.291% in 2020. Despite these fluctuations, Hochtief’s yield has often surpassed the industry average, particularly in recent years. For instance, in 2020, while the industry average yield was 1.03%, Hochtief’s was 7.291%. This consistent outperformance can make the stock an attractive option for investors seeking higher dividend income. It's worth noting, however, that such fluctuations in dividend yield can depend on both changes in the stock price and dividends paid. Hochtief's ability to maintain and grow such yields will depend on its future profitability and payout policies.

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

Dividend Growth Rate reflects how much a company’s dividends have increased over a certain period. It is critical for investors seeking income because a higher rate can signal good future prospects and financial health.

Hochtief (HOT.DE) has demonstrated varying dividend per share ratios over the past 20 years, ranging from significant increases to noticeable declines. Key observations include the notable growth of 109.42% in 2023, in contrast to the sharp drop of -100% in 2012 and other years with negative ratios. Despite these fluctuations, the average dividend per share ratio stands at around 13.51%. While this average exceeds the 5% mark, the volatility and occurrence of significant negative growth years highlight instability. Consequently, although the overall trend indicates a positive average growth rate per the initial criterion, the broad swings and periods of negative growth introduce a level of risk and inconsistency for dividend investors. Thus, while the 5% benchmark is met, the trend's reliability might be questionable for potential investors who prioritize stable and predictable growth.

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

The payout ratio is a crucial indicator that measures the proportion of earnings a company pays to its shareholders in the form of dividends. A payout ratio lower than 65% is generally considered sustainable and signifies the company's ability to reinvest earnings for growth.

Hochtief (HOT.DE) exhibits an average payout ratio of approximately 39.70% over the past 20 years, which is well below the threshold of 65%. However, there are significant fluctuations with extremely high payout ratios in certain years, such as 2003 (213.68%) and 2011 (-87.64%), and even a few years where no payout was made (2012 and 2023). Despite these anomalies, the overall trend indicates a relatively sustainable dividend policy. This lower average payout ratio suggests that Hochtief generally aims for a balanced approach, returning earnings to shareholders while retaining enough capital for reinvestments. This trend is positive given that the majority of the period observes prudent payout levels, albeit with some volatility. More analysis should be focused on years with extreme values to understand the underlying reasons.

Dividends Well Covered by Earnings?

Dividends well covered by earnings means that a company's net earnings are sufficient to pay the declared dividends. This is important because it indicates financial stability and sustainability of dividend payments. It suggests the company can continue to reward shareholders without compromising its financial health.

Examining the data for Hochtief (HOT.DE), we see fluctuations in the coverage of dividends by earnings. In recent years like 2023, the earnings per share (EPS) is zero, which implies no coverage for the dividend. There are years, such as 2011 and 2019, where the coverage ratio was negative or exactly zero, indicating the company was not generating sufficient earnings to cover dividends. Even during positive EPS years, like 2019 (6.1567 EPS vs. 4.98 dividend), the coverage isn't ideal as earnings should significantly exceed dividends for proper financial health. A high and consistent coverage ratio, significantly greater than 1, ensures the affordability of dividends. A coverage ratio below 1 or consistently low, as observed in certain years, raises concerns about the sustainability of dividends, signaling potential risks for investors.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates whether a company's operating cash flow is sufficient to cover its dividend payouts. It is essential for financial health.

Upon examining the free cash flow and dividend payout amounts for Hochtief (HOT.DE) from 2003 to 2023, we note significant variation year over year. The dividend-to-cash-flow coverage ratio frequently falls below 1, indicating periods where free cash flow is insufficient to cover dividends. For instance, in 2008, free cash flow was -379.36 million EUR against zero dividends, leading to negligible coverage. Conversely, in years like 2015 and 2016, the ratios were low but positive. Notably, 2020 shows a strong ratio at 1.42, demonstrating strong cash flow. However, the inconsistency, especially in earlier years, is concerning. Overall, while there are good years, the trend presents a mixed picture regarding dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a prolonged period reflect the company’s consistent financial health and its commitment to returning value to shareholders through stable payout policies.

Analyzing Hochtief's dividend payments over the past 20 years, the company shows a marked inconsistency in their dividends. Notably, there was a complete halt in dividend payments in 2012, followed by a dramatic recovery then decline trend in subsequent years. Even though the dividend per share reached €5.80 in 2020, it reduced sharply to €3.93 in 2021, significantly exceeding the 20% threshold of decline. This inconsistency in the dividend trend reflects a lack of stability which is generally an unfavorable criterion for income-seeking investors. Therefore, relying on Hochtief for stable dividends may not be advisable.

Dividends Paid for Over 25 Years?

Dividends are often seen as a sign of a company's financial health and profitability. Consistently paying dividends over a long period reinforces investor confidence in the company's stability and future outlook.

Hochtief's dividend history shows that the company has paid dividends consistently for the majority of the past 24 years except for 2012 when no dividend was paid. The dividends per share have generally increased over time, from €0.75 in 2000 to €4 in 2023. The interruption in 2012 might be concerning, but the overall trend demonstrates resilience and growth. Although Hochtief does not meet the 'Over 25 Years' criterion, the long-term upward trend in dividends is a positive sign, indicating good financial health and robust performance during these years.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases suggest that a company is consistently returning value to its shareholders. It often indicates that the company is confident in its financial stability and future prospects.

Analyzing the number of shares over the last 20 years, there have been several years where Hochtief engaged in stock repurchases, as indicated by the years 2009, 2013, 2014, 2015, 2016, 2017, 2020, 2021, and 2023. Specifically, these repurchases resulted in a reduction of available shares, which can often create shareholder value by boosting earnings per share (EPS). The average repurchase rate calculated over the last 20 years stands at -4.2587%, which is favorable because of the consistent decrease over time. This points to a reliable trend in stock repurchases. However, there were also periods where the number of shares increased, such as in the years 2006-2008. This might have been used for capital raising operations. On balance, the trend leans towards reliability in returning capital to shareholders, which is beneficial.