Last update on 2024-06-28

Indra Sistemas (IDA.F) - Dividend Analysis (Final Score: 5/8)

In-depth dividend analysis of Indra Sistemas (IDA.F), evaluating performance and stability across eight criteria. Final dividend score: 5/8.

Short Analysis - Dividend Score: 5

We're running Indra Sistemas (IDA.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Indra Sistemas (IDA.F) received a dividend score of 5 out of 8 criteria. While the company has a higher than industry average dividend yield of 1.7832%, there are concerns over its dividend policy. The average annual growth rate of dividends has not been higher than 5% and shows significant fluctuations. The average payout ratio is very low at 1.53862%, suggesting prudent financial management. Dividends have been somewhat covered by earnings but showed inconsistencies. Positive improvements were noted in the free cash flow covering dividends. However, the company has unstable dividends, not paid for 25 years, and unreliable stock repurchases, raising concerns about dividend stability and predictability.

Insights for Value Investors Seeking Stable Income

Indra Sistemas shows a mix of both positive and negative indicators concerning its dividend policy. While it has prudent financial management and positive recent cash flow trends, its historical inconsistency in dividend payments and unreliable stock repurchases might not make it a top choice for income-focused investors seeking stable and predictable returns. It could be worth monitoring for potential improvement in financial practices but might not be the best immediate investment for those prioritizing regular dividend income.

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 represents the ratio of a company's annual dividend compared to its share price. It is an important metric for income-focused investors because it indicates how much cash flow they are getting for each dollar invested in equity.

Indra Sistemas (IDA.F) has a current dividend yield of 1.7832%, which is notably higher than the industry average of 1.12%. This might attract income-focused investors looking for higher-than-average returns on their investments. IDC's yield has fluctuated over the years, with notable highs in the late 2000s and early 2010s reaching over 6.9%. However, the company stopped dividend payments from 2015 to 2021, indicating potential financial instability or strategic redirection. Reintroduction of the dividend post-2021 is a positive signal but also shows a lower yield compared to its historic highs, aligning more closely with the industry average.

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

The Dividend Growth Rate metric reflects the compounded annual growth rate of dividends distributed to shareholders over a specific time period. It is a key indicator of financial health and shareholder value.

Analyzing the dividend ratio of Indra Sistemas (IDA.F) over the past 20 years, we observe significant fluctuations. The average dividend ratio of 0.6363 indicates that, on the whole, dividend growth has been minimal and inconsistent. The company even registered negative growth in several years (e.g., 2015, 2012, and 2023). This inconsistency, coupled with years of no dividend payouts, suggests a volatile and unpredictable dividend policy, which is generally unattractive to long-term dividend-seeking investors. In conclusion, the dividend growth rate of Indra Sistemas has not been stable or higher than 5%, reflecting a concerning trend for the company’s dividend strategy.

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

A Payout Ratio lower than 65% indicates that the company is efficiently retaining enough earnings to fuel future growth while also rewarding shareholders with dividends.

Indra Sistemas (IDA.F) exhibits a mean payout ratio of 1.53862% over the past two decades, which is significantly below the 65% threshold. This trend is remarkably positive as it underscores the company's prudent financial management strategy. By consistently maintaining a low payout ratio, Indra Sistemas has effectively retained more earnings for future investment and growth while also delivering modest dividends to its shareholders when applicable, such as in 2022. Overall, this low payout ratio bodes well for the company's financial stability and its potential to sustain dividend payouts in the future while investing in additional growth opportunities.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This means that the company generates enough profits to comfortably pay out dividends to its shareholders. It ensures the sustainability of the dividend policy and financial health of the company in the long term.

An analysis of Earnings Per Share (EPS) and Dividend Per Share (DPS) from 2004 to 2023 indicates that Indra Sistemas has had varying success in covering its dividends with its earnings. The company's EPS turned significantly positive in 2017, showing a positive momentum with 0.7217 in 2017 to 0.9749 in 2022. However, the dividend coverage ratio has only been positive in 2022 (approximately 30.77%) and still showed a downward revision in 2023. Although the EPS itself shows a more stable and growing trend over recent years, the negligible or zero dividend coverage ratio in multiple years indicates poor alignment between payout and earnings. This trend is concerning as consistent earnings should ideally cover the dividend to ensure shareholder returns, pointing to risk regarding dividend sustainability.

Dividends Well Covered by Cash Flow?

Covering dividends with cash flow is crucial because it ensures that a company is generating enough cash from its operations to not only run its day-to-day activities smoothly but also to pay dividends to its shareholders. Companies that need to take debt or use external financing to pay dividends can face sustainability issues in the long term.

Analyzing the free cash flow (FCF) figures for Indra Sistemas (IDA.F), which show a significant positive trend from 2017 onwards, it's clear that the company is improving its cash generation capabilities. The FCF went from zero during the years up till 2016, increased to approximately €195 million in 2017, and further to around €316 million in 2023. Simultaneously, the dividend payout amount was re-established in 2019 and has grown gradually, amounting to approximately €44 million in 2023. This indicates that the company is now covering its dividend payouts solely from its FCF without relying on external funding. The ratio of dividends covered by FCF improved significantly from around 0.48 in 2019 to approximately 0.14 in 2023. Lower ratios signify better coverage as it suggests a smaller percentage of FCF required for dividend payouts. Hence, based on these numbers, Indra Sistemas appears to be in a healthy position, demonstrating a positive trend and good sustainability in covering dividends with its cash flow.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over the past 20 years shows that the company has a reliable stream of earnings. For income-seeking investors, it is important as it ensures consistent returns on their investment, without the fear of large drops in income.

The dividend per share data for Indra Sistemas (IDA.F) shows notable instability. Between 2011 and 2012, the dividend dropped from 0.68 to 0.34, a 50% reduction. Moreover, from 2015 to 2023, the company paid no dividends at all until 2022 where the dividend payment was reinstated at 0.3 and then reduced to 0.25 in 2023, reflecting further volatility. Such inconsistencies suggest negative trends for income-focused investors, who generally prefer stability and predictability in dividend payments. Hence, for those focusing on reliable income, Indra Sistema cannot be considered a stable dividend payer.

Dividends Paid for Over 25 Years?

Assessing whether a company has paid dividends consistently for 25 years is crucial as it indicates reliability in returning value to shareholders.

Indra Sistemas (IDA.F) has not consistently paid dividends over the past 25 years. From the data given, the company had a regular dividend payout from 2004 to 2011, with a notable gap from 2012 to 2019 where no dividends were paid. The dividends resumed in 2022, but were again inconsistent. This inconsistent pattern is concerning as it may indicate issues in the company's profitability or cash flow management. A stable or growing dividend history over a long period is often a sign of a company's strong financial health and reliable cash flows, hence Indra's inconsistency in this regard could be seen as a negative trend.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the significance of reliable stock repurchases for Indra Sistemas and why it is essential for long-term investors.

Over the past 20 years, Indra Sistemas has had erratic stock repurchase behavior. The company did not consistently repurchase stock as seen from the dataset, showing zero shares for multiple years and only recent activity in years 2013, 2020, 2021, and 2023. This erratic behavior is reflected in a negative average repurchase rate of -10.5119. Such inconsistency can signal an unpredictable capital allocation strategy, raising concerns over the company's commitment to shareholder returns and overall financial health.