Last update on 2024-06-27

Indus Holding (INH.DE) - Dividend Analysis (Final Score: 5/8)

In-depth dividend analysis of Indus Holding (INH.DE), evaluating its performance and stability based on an 8-criteria scoring system. Final Score: 5/8.

Short Analysis - Dividend Score: 5

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

Indus Holding's current dividend yield is higher than the industry average at 3.58%, which is attractive for income investors. However, the average annual dividend growth rate is only 1.49%, below the desired 5%. The payout ratio, averaging around 22.59%, is well below the 65% threshold, ensuring dividends are sustainable. Despite this, earnings and cash flow coverage are inconsistent, raising concerns about long-term dividend sustainability. The company has a history of fluctuation in dividends, not always stable, with dividends paid out for over 20 years but not consistently. Reliable stock repurchases are not evident, indicating a potential lack of shareholder returns through buybacks.

Insights for Value Investors Seeking Stable Income

Indus Holding (INH.DE) might be a cautious pick for dividend-focused investors. Its high current yield is a plus, but the unstable dividend growth and coverage raise red flags. It may be worthwhile if you value high current income over consistency. Examine other aspects of the business or consider more stable dividend stocks if you prioritize reliable, predictable 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 is a measure of the dividend income relative to the dollar value of the share. It helps investors gauge the relative safety and attractiveness of a stock's income characteristics.

Indus Holding (INH.DE) has a current dividend yield of 3.5794%, which is substantially higher than the industry average of 2.55%. This trend indicates that Indus Holding is offering relatively better dividend income compared to its industry peers. Over the past 20 years, Indus Holding's dividend yield has fluctuated significantly, reaching as high as 8.9552% in 2008 and as low as 2.2689% in 2017. Despite these fluctuations, the latest yield remains compelling against the backdrop of a lower industry average. For instance, since 2019, Indus Holding’s dividend yield has mostly remained above the 3% mark, highlighting a stable and attractive dividend policy. Additionally, it is important to consider that the stock price has adjusted over the years, moving from €20.45 in 2003 to €22.35 in 2023, while maintaining dividend consistency. Thus, from the perspective of dividend income, Indus Holding offers a favorable position in the market, making it an appealing choice for income-focused investors.

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

The dividend growth rate criterion measures the annualized percentage increase in dividend payments. A growth rate above 5% signifies consistent improvements in shareholder returns, indicating company growth and stability.

Indus Holding (INH.DE) has exhibited a volatile dividend history over the past 20 years, with years of no dividend issuance and several instances of negative growth rates. The data shows significant fluctuations: as observed, the dividend per share growth rate has varied drastically, such as 80% in 2011 and -50% in 2021. The average dividend growth rate is approximately 1.49%, which is well below the desired 5% threshold. This inconsistent pattern may concern potential investors seeking stable, long-term dividend growth, suggesting that Indus Holding may not be the most reliable option for those prioritizing predictable dividend income.

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

The payout ratio indicates the proportion of earnings a company pays out to its shareholders in the form of dividends. A sustainable payout ratio is typically under 65%, indicating that the company is not over-distributing dividends to the potential detriment of future growth and operational needs.

Examining Indus Holding (INH.DE) over the past 20 years, the payout ratio has shown substantial fluctuation. Notably, there were periods, such as in 2008 and 2009, where the payout ratio peaked significantly above the 65% threshold, reaching 77.88% and an unsustainable 128.80%, respectively. In 2020 and even in 2022, the payout ratio dropped into negative values, indicating no dividend paid out or a net loss. Despite these anomalies, the calculated average payout ratio rests at approximately 22.59%, well below the 65% target. This overall low average is a positive indicator, suggesting that Indus Holding largely maintains a conservative dividend distribution policy, ensuring the business retains sufficient earnings for reinvestment and future growth. Nevertheless, the spikes and negative values warrant closer examination of the company's year-to-year financial stability and profitability.

Dividends Well Covered by Earnings?

Dividends well covered by earnings enable the company to sustain their dividend payouts, indicating financial stability.

Examining the ratio of dividends per share covered by earnings per share for Indus Holding (INH.DE) from 2003 to 2023, we notice concerning trends, especially in recent years. The ratios fluctuate significantly, with notable dips in 2020 and 2022 where values are negative, indicating the company's earnings were insufficient to cover dividend payouts. For instance, in 2019, the ratio was approximately 0.617, showing solid coverage, but it dropped to negative in 2020 and 2022, which raises red flags. Such volatility in coverage ratios underscores potential risks in dividend sustainability, which can affect investor confidence.

Dividends Well Covered by Cash Flow?

This criterion evaluates the company's ability to cover their dividends with the free cash flow they generate annually. It's essential because strong coverage indicates sustainability.

Indus Holding's free cash flow coverage of dividends has been volatile over the years. While the company had decent coverage in years like 2009, 2010, and 2013, 2014, a consistent pattern of weak coverage is notable in other years, particularly negative coverage in 2012 and 2018. For example, in 2018, free cash flow was negative €16,231,000 against a dividend payout of €36,676,000, equating to a coverage ratio of -2.26. However, recent trends show some improvement, with the 2023 ratio being 0.138 indicating positive but weak coverage. This inconsistency raises questions about the ongoing sustainability of dividend payments.

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.

When analyzing Indus Holding (INH.DE) and its dividend payments over the last 20 years, several key points emerge. Firstly, examining the dividends per share from 2003 to 2023, we see fluctuations rather than stable growth. Notably, in 2009, the dividend dropped from 1.2 EUR to 0.8 EUR, a significant decrease of 33.3%. Another drop occurred in 2020 when dividends fell from 1.6 EUR to 0.8 EUR, marking a drastic 50% reduction. For income-seeking investors, these fluctuations indicate instability which could be worrisome. Stability often assures predictable income and reduces the risk associated with dividend investing. Therefore, this trend of fluctuating dividends is not favorable for Indus Holding (INH.DE), making it less appealing to those prioritizing consistent dividend income.

Dividends Paid for Over 25 Years?

Why is reviewing if dividends have been paid for over 25 years important to consider for Indus Holding (INH.DE)?

It is critical for investors to evaluate whether a company has a long-standing history of paying dividends because it demonstrates the company's ability to generate consistent profits and profitability over time. Stable and dependable dividends are especially attractive to income-seeking investors and those seeking financial stability.

Reliable Stock Repurchases Over the Past 20 Years?

Dividend reliability is related closely to stock repurchase programs. Evaluating stock buybacks gives insights into how a company rewards its shareholders.

Indus Holding (INH.DE) has not exhibited consistent stock repurchase behavior over the last 20 years. They have only reliably repurchased shares in 2004 and 2017 with an average repurchase rate of just 0.4303. The number of shares shows fluctuating figures, from 26.89M in 2003, dropping significantly to 18M in 2004, then reverting back approximately to initial figures in later years. Irregular stock repurchase indicates that Indus Holding might not prioritize returning capital to shareholders via stock buybacks, relying perhaps more on other forms of capital allocation. This trend is not favorable for investors who seek companies with consistent buyback programs.