Last update on 2024-06-27

Ingersoll Rand (IR) - Dividend Analysis (Final Score: 4/8)

Analyzing Ingersoll Rand's (IR) dividend policy reveals mixed results, with a 4/8 score evaluating performance and stability over 20+ years.

Short Analysis - Dividend Score: 4

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

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

The dividend yield for Ingersoll Rand over the last 20 years reveals a mixed pattern with a notably higher yield in 2017 at 3.83% and peaking at 9.58% in 2018. However, the current yield of 0.1034% is significantly lower than the industry average of 1.57%. The downward trend post-2019 represents a shift in the company's dividend payout strategy, and the very low current yield may render this stock less attractive to income-focused investors. This could be seen as unfavorable when compared with the consistent industry average yields.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend over a specified period. It is crucial as it indicates the company's ability to consistently increase returns to shareholders.

In analyzing Ingersoll Rand's Dividend Growth Rate over the last 20 years, we notice highly irregular trends. For years from 2003 to 2015, there were no dividend payments. However, starting 2016, the figures fluctuate dramatically, with peaks and troughs such as -50 in 2019 and 300 in 2022. The average dividend ratio of 10.04% is above 5%, but the irregularity brings caution. This erratic trend suggests inconsistency in dividend payments and possibly hints at underlying volatility in revenue or profit. These fluctuations make it challenging to deduce a reliable dividend growth pattern, which is critical for income-focused investors.

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

The average payout ratio measures the proportion of earnings paid out as dividends to shareholders, indicating a company's dividend sustainability.

Ingersoll Rand's average payout ratio over the last 20 years is 24.56%, which is well below the 65% threshold. This is a positive trend as it demonstrates the company's ability to sustain and potentially grow its dividends while retaining enough earnings for reinvestment. Despite noticeable anomalies in certain years, the long-term average remains low, highlighting a disciplined approach in dividend payments.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The Earnings per Share (EPS) of Ingersoll Rand (IR) has shown significant volatility over the years, exhibiting fluctuations from a high of 14.2697 in 2007 to negative values in 2013, 2014, 2015, and 2016. The Dividend per Share (DPS) was non-existent until 2017, with a steady increase until 2020. Notably, while the dividends were well covered by earnings in 2017 (13.0) and 2018 (1.519), years like 2019 (-12.18) and 2022 (0.0536) exhibit unmistakable concerns with extremely low coverage. This inconsistency reveals that, while there are periods where dividends were well-covered, the overall trend is mixed and poses risks. Additionally, the negative EPS in certain years severely impacts dividend coverage. Thus, it is a mixed trend which over long term was largely negative.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow for Ingersoll Rand (IR)

Free cash flow (FCF) coverage of dividends is critical as it shows the ability of a company to cover its dividend payments with the cash generated from its operations. This metric helps investors gauge the sustainability of the dividends. An FCF coverage of over 1 indicates that the company generates enough cash to pay its dividends solely from its operations, without needing to incur debt or dilute shareholders' equity.

Stable Dividends Since the Company Began Paying Dividends?

The presence of stable dividends over a 20-year period without significant drops suggests financial health, sustainability, and reliability of the company.

From 2003 to 2014, Ingersoll Rand did not pay any dividends, starting its payments in 2015 with a dividend of $1.3 per share. The dividend reached a peak of $2.12 in 2019. However, there was a sharp drop in 2020 to $1.06, which is a 50% decrease. This drastic reduction is not ideal for income-seeking investors. Furthermore, the dividend decreased even more dramatically to $0.02 in 2021 and slightly recovered to $0.08 in 2022 and 2023. This inconsistent dividend history shows a volatile performance rather than stable growth, likely reflecting fluctuations in Ingersoll Rand's profitability and financial strategy.

Dividends Paid for Over 25 Years?

Is this company able to pay dividends for over 25 years? This criterion is important as it indicates the company's ability to consistently generate enough profit to return value to its shareholders.

Ingersoll Rand (IR) does not meet the criterion of paying dividends over 25 years. According to the data provided, the company only began paying dividends in 2017. Between 2017 and 2019, the dividend per share was substantial, peaking at $2.12 in 2019. However, it dropped significantly in 2020 and has remained quite low in 2021 and 2022. This inconsistent dividend payment trend suggests potential instability in profit generation or a shift in company policy regarding shareholder returns. Thus, this trend is unfavorable for long-term dividend-seeking investors as it doesn't ensure a steady dividend payout.

Reliable Stock Repurchases Over the Past 20 Years?

Discussing the reliability of stock repurchases over a 20-year period for Ingersoll Rand (IR) and its importance.

Analyzing the data over the last 20 years, Ingersoll Rand (IR) made significant repurchase actions in 11 out of 20 years, as indicated by years such as 2004, 2005, 2007, and others. However, this repurchase activity has not been consistent year-to-year. Total shares outstanding fluctuated significantly, with a low of 22,173,500 shares in 2008 to a high of 428,527,500 shares in 2009. Given the average repurchase rate of approximately 87.63 million shares, substantial changes in repurchase behavior are noted. Crucial drivers for these figures likely include strategic shifts, capital structure adjustments, and broader market conditions, pointing to an inconsistency in IR's approach to share buybacks. While significant repurchases occurred, suggesting opportunities potentially taken to enhance shareholder value and optimize capital structure, the lack of regularity points to a more opportunistic rather than systematic repurchase strategy. This inconsistency can add an element of uncertainty for investors relying on consistent buybacks as a return mechanism.