Last update on 2024-06-27

Invitation Homes (INVH) - Dividend Analysis (Final Score: 5/8)

Discover the comprehensive dividend analysis of Invitation Homes (INVH), rated 5/8, assessing stability and performance using 8 key criteria.

Short Analysis - Dividend Score: 5

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

The dividend analysis for Invitation Homes (INVH) uses an 8-criteria scoring system. The evaluation shows that INVH has a dividend yield above the industry average, indicating good income returns. However, the Average Payout Ratio and Stock Repurchase activities performed poorly. Concerns were raised about high payout ratios and a lack of long-term stable dividends, with inconsistent dividends since they began in 2017.

Insights for Value Investors Seeking Stable Income

INVH shows some positive dividend attributes, like good growth and EPS coverage since 2019, but negative factors like high payout ratios and a short dividend history create risks. Careful investors may want to look elsewhere for more consistently reliable dividend stocks. However, if you believe in the company's long-term vision and improved trends, it could still be worth considering as a growth opportunity.

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 the annual dividends paid out by a company relative to its stock price, serving as an indicator of income generation.

Invitation Homes (INVH) has a current dividend yield of 3.8698%, which is above the industry average of 3.56%. This suggests the company's ability to provide superior income returns compared to its peers. Over the past decade, INVH's dividend yield has seen a significant increase from 0% in 2017 to 3.8698% in 2023. Although there's a relatively modest yield growth from 2017 to 2018, the subsequent years saw consistent increases. The high yield in 2023 is favorable and demonstrates improved dividend distribution. Additionally, the stock price of INVH has fluctuated with substantial gains from 2017 to 2023, indicating that growing dividends have not negatively impacted the stock value. This trend is positive for investors seeking competitive yield compared to industry standards.

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

Explain the criterion for Invitation Homes (INVH) and why it is important to consider

The Dividend Growth Rate criterion measures the annualized percentage rate of growth of a company's dividend payments to shareholders. Achieving a growth rate higher than 5% over a long period such as 20 years indicates a financially healthy company with increasing profits and a shareholder-friendly policy. It also shows the ability to generate and share increasing wealth, thus making the stock more attractive to dividend-seeking investors.

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

The payout ratio measures the proportion of earnings paid out as dividends to shareholders. A lower payout ratio generally indicates a company is retaining more earnings for growth, and a payout ratio below 65% is often seen as sustainable and attractive for investors.

Invitation Homes (INVH) has an observed payout ratio for the years 2014 to 2023 as follows: 0% (2014, 2015, 2016), -108.43% (2017), -4631.58% (2018), 189.92% (2019), 169.40% (2020), 150.28% (2021), 139.99% (2022), and 155.48% (2023). The overall average payout ratio over this period is approximately -393.49%, which is far above the 65% threshold for a sustainable payout ratio. The negative payout ratios in 2017 and 2018 indicate that Invitation Homes paid dividends despite having negative earnings, which is concerning. Positive ratios above 100% in subsequent years show that the company has been paying out dividends larger than its earnings, which can be unsustainable in the long run. Such trends might suggest financial instability or an over-reliance on external financing to maintain dividend payments. Hence, this trend is unfavorable and could potentially be a red flag for investors looking for stable dividend income.

Dividends Well Covered by Earnings?

Dividends should ideally be well covered by earnings to ensure that payouts are sustainable and not at risk. This ratio indicates how many times the company’s earnings cover the dividend payout, showcasing financial health and dividend stability.

Analyzing Invitation Homes' (INVH) Earnings Per Share (EPS) and Dividend Per Share (DPS) from 2014 to 2023 reveals a dynamic dividend coverage scenario. In the early years (2014-2018), the EPS was not sufficient to cover dividends, with negative EPS and coverage ratios highlighting a period of financial instability. Such trends indicate that dividends were either paid through debt or other means, reflecting a riskier financial profile. However, starting from 2019, this trend reversed with DPS being consistently covered by EPS. By 2023, the coverage ratio reached 1.55, indicating that EPS comfortably covers dividends. This upward trend in dividend coverage demonstrates improved financial stability, suggesting that dividends are now more sustainable and less likely to be at risk in the face of economic headwinds. Overall, the positive trend from 2019 onwards shows a notable improvement in the company's financial health and dividend reliability.

Dividends Well Covered by Cash Flow?

The criterion for dividends being well covered by cash flow means that the company should generate enough free cash flow to pay its dividends. A ratio above 1 indicates that the company is generating more cash flow than it is paying out in dividends, which is a good indicator of dividend sustainability.

When evaluating Invitation Homes (INVH) and its dividend coverage by cash flow from 2014 to 2023, it's clear that the company has made significant progress in covering its dividends with free cash flow. In 2014, the dividend was not well covered with a negative cash flow coverage ratio of -62.95. This greatly improved over the years, reaching a ratio of 0.72 in 2023, indicating a better balance between cash flow generation and dividend payout. For example, in 2014, free cash flow was -$12.51 million against a dividend payout of $787.60 million, leading to a poor dividend coverage. However, by 2023, free cash flow improved to $885.99 million, with the dividend payout also increasing to $638.13 million. Despite the rise in dividend payouts, free cash flow grew at a relatively consistent rate, improving the dividend coverage ratio. A ratio gradually increasing and nearing 1 shows that INVH is moving toward a more sustainable dividend payout model. As long as this trend continues, it bodes well for shareholders who rely on regular dividend income, showcasing improving financial health and disciplined cash flow management by the company. Despite not yet reaching the ideal coverage ratio of 1, the improving trend from negative coverage to 0.72 is a positive indicator.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years. 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.

Invitation Homes (INVH) has only provided dividends since 2017, with dividends starting at $0.22 per share and growing to $1.32 per share in 2023. While this indicates significant growth, the company does not meet the criterion of stable dividends over 20 years, given its relatively short history of distribution. Furthermore, there has been a year where the dividends dropped by over 20%, which adds to the inconsistency. For income-seeking investors prioritizing long-term dividend stability, these results could be perceived as negative as they indicate the lack of prolonged stable dividend history.

Dividends Paid for Over 25 Years?

A company's ability to pay dividends consistently for over 25 years often indicates financial stability, profitability, and reliable cash flow, making it an important factor for long-term investors.

Invitation Homes (INVH) has not been paying dividends for over 25 years, as indicated by their dividend per share payments starting only in 2017. This relatively recent initiation of dividends means that the company does not yet have a long track record of dividend payments. Since the company only started paying dividends in 2017, it has been steadily increasing its payout, from $0.22 per share in 2017 to $1.32 per share in 2023. While this trend of increasing dividends is a positive sign, the lack of a 25-year history might make some long-term, conservative investors wary. Nevertheless, the steady growth in dividend payments suggests a commitment to returning value to shareholders and potential for building a strong dividend history in the long run.

Reliable Stock Repurchases Over the Past 20 Years?

Measure the consistency and volume of a company's stock repurchase activities over a considerable period.

To determine Invitation Homes' (INVH) reliability in stock repurchases over the past 20 years, one could analyze the fluctuation in the number of outstanding shares. According to the provided data, the number of shares has consistently increased from 302,116,760 in 2014 to 611,893,784 in 2023. The absence of any reliable repurchased years over the last 20 years suggests that the company has not engaged in significant or consistent buyback programs during this period. The observed trend is not favorable for shareholders expecting capital return through repurchases. Instead, it appears that the company has preferred other methods for capital allocation, potentially via expansion or other investments. Therefore, the average repurchase metric holding at 9.8474 shares indicates minimal to no practical impact on the repurchase front. This focus on share number growth rather than repurchase does not align with the criteria of reliable stock repurchases and may not appeal to investors seeking benefits from such activities.