Last update on 2024-06-27

Johnson Controls (JCI) - Dividend Analysis (Final Score: 6/8)

Analyze Johnson Controls' (JCI) dividend performance. Score 6/8! Stability, yield, growth. Understand dividend policy insights.

Short Analysis - Dividend Score: 6

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

The dividend analysis evaluated Johnson Controls (JCI) using an 8-criteria scoring system and awarded a dividend score of 6. Key points include: a dividend yield of 2.5503% which is higher than the industry average; however, inconsistent average annual growth rates despite being overall high. It has a low average payout ratio of 21.16% over the last 20 years, indicating long-term sustainability. Dividends have fluctuated over the years but generally remain well-covered by earnings and cash flow, with some exceptions. JCI has paid dividends for over 25 years and has shown reliable stock repurchases in recent years, despite past share dilution.

Insights for Value Investors Seeking Stable Income

Johnson Controls (JCI) shows promising aspects for dividend-seeking investors with its above-average yield, low payout ratio, and long history of dividend payments. However, the inconsistency in dividend growth and coverage ratios might raise concerns for those looking for steady growth. Investors should consider these factors and monitor future trends to make a well-informed 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 measures the annual dividends paid out by a company relative to its stock price. A higher yield can indicate an attractive income investment.

Johnson Controls (JCI) boasts a dividend yield of 2.5503%, which is above the industry average of 2.27%. This figure suggests that Johnson Controls is a relatively more attractive choice for income-focused investors. The trend over the last 20 years shows considerable volatility, with extreme peaks such as 60.0041% in 2007 and a subsequent drop. However, the yield has stabilized recently, hovering around the 2-3% range. The recent consistency around 2.5503% can be seen as a positive sign, indicating a more stable and predictable income stream for shareholders.

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

The Dividend Growth Rate measures the annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time. It is important as a constant or increasing rate can be a strong sign of a company's profitability and stability.

When analyzing Johnson Controls' (JCI) Dividend Growth Rate over the last 20 years, we can observe that the dividend rates have seen extreme fluctuations, with significant positive and negative swings. The spikes, such as 518.329% in 2007 and 237.3292% in 2016, contrast sharply with severe drops like -92.8592% in 2008 and -84.4738% in 2017. The average dividend ratio is fairly high at 35.7385%, suggesting that there were years of robust dividend growth compensating for the years with significant drops. This sporadic pattern reveals a lack of consistency in dividend increases and could be perceived as a negative element by dividend growth investors. They generally prefer steady and predictable increases. Hence, while the average growth rate is above 5%, the inconsistency would raise red flags for those emphasizing sustainable growth.

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

The payout ratio indicates the proportion of earnings a company pays to its shareholders in the form of dividends. Lower than 65% is considered sustainable.

The average payout ratio for Johnson Controls (JCI) over the last 20 years is around 21.16%. A low payout ratio of below 65% suggests that the company has retained a substantial portion of its earnings for reinvestment, growth, or debt reduction. This supports long-term sustainability and business health. Analyzing individual years, in 2007, 2009, 2013 to 2016, 2018, and 2020, the payout ratio exceeded the desirable 65% mark, indicating potential financial stress or exceptional dividends in those years. Particularly, 2007 and 2020 stand out with ratios of 188.68% and 123.78%, respectively, indicating periods of possibly low earnings or extraordinarily high dividend payments. Despite these anomalies, the overall trend with the average being significantly lower is positive, affirming JCI’s prudent fiscal management and dividend policy.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings ensures the company can sustain paying dividends without compromising financial stability, crucial for long-term investor confidence.

Johnson Controls (JCI) has a fluctuating trend in dividends covered by earnings per share (EPS). In 2007, the ratio spiked to 1.88, partly explaining possible financial instability manifested in the subsequent low EPS of 2008 and highly negative EPS of 2009. Post-2010, the ratios normalized within 0.4-0.87, reflecting improved financial stability. However, in 2016, the coverage ratio turned negative, which indicates that the dividends were not covered by the earnings that year. This returned to a healthier ratio by 2020, where it temporarily peaked over 1. The generally increasing EPS after 2016 indicates better earnings to cover dividends, a good sign for sustaining future payments. Still, the ratios remain less than 1, suggesting vigilance is needed for sustainable dividend policies.

Dividends Well Covered by Cash Flow?

Explain the criterion for Johnson Controls (JCI) and why it is important to consider

Dividends Well Covered by Cash Flow refers to the ability of a company to pay its dividends using the free cash flow generated from its operations. It is important because it provides insight into the sustainability and long-term viability of the dividend payments. A higher ratio indicates that the company is generating sufficient cash flow to cover its dividend payouts, which is generally considered a positive sign for investors.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a long period are crucial as they assure investors of consistent returns, demonstrating the company's reliable earnings and sound financial health.

Analyzing the dividends per share for Johnson Controls (JCI) over the past 20 years indicates some volatility. Notably, the dividend per share substantially decreased in 2004, 2008, and 2016. However, none of these declines exceeded the 20% threshold significantly, thus showing a relatively stable dividend history over time. The pattern of fluctuations in years such as 2008 (from 12.3841 to 0.8844) suggests adjustments related to structural or financial shifts within the company possibly due to the economic downturn. Despite these dips, the company's ability to maintain dividends without drastic cuts is a positive signal, albeit inconsistencies in specific years require cautious interpretation.

Dividends Paid for Over 25 Years?

Consistency in dividend payments over a long duration demonstrates a company's financial stability and commitment to returning value to shareholders.

Johnson Controls (JCI) has consistently paid dividends for over 25 years, showcasing its stable financial health and shareholder-friendly approach. The dividends per share have generally increased from $1.0441 in 1998 to $1.47 in 2023, although some fluctuations occurred, such as a peak in 2007 at $12.3841 followed by a significant drop in 2008. These fluctuations suggest periods of financial restructuring or strategic shifts, but overall, the upward trajectory is favorable. This trend is good as it highlights JCI's dedication to sharing profits with investors over the long haul, indicating reliability in income for dividend-seeking investors.

Reliable Stock Repurchases Over the Past 20 Years?

This criterion examines if the company has consistently bought back its own shares, which can indicate strong financial health and increase shareholder value.

Over the last two decades, Johnson Controls (JCI) shows a mixed but generally positive trend in stock repurchase activities. Between 2003 and 2023, the company's share count initially greatly increased from 22.6 million in 2003 to a peak of approximately 944.6 million in 2017. However, in recent years, the number of shares has been decreasing consistently. Particularly notable are the years 2018 onwards, where the share count fell significantly each year, marking robust and aggressive buyback activities. For instance, the share count dropped from 944.6 million in 2017 to 684.3 million by 2023. This drop signifies approximately a 28% reduction in the outstanding shares over the six-year period, which is a strong indicator of the company’s commitment to returning value to shareholders. While there were periods of share dilution, presumably due to acquisitions or issuance, the more recent aggressive buybacks outweigh earlier expansions. The average repurchase rate of 31.9901 over 20 years implies a moderate level of share repurchases, further confirmed by the notable buyback years: '2009', '2012', '2014', '2015', '2018', '2019', '2020', '2021', '2022', and '2023'. Hence, JCI’s reliable trend of stock repurchases in recent years is a favorable sign for investors, implying improved financial health and focused capital allocation strategies. Additionally, it is critical to monitor future buyback trends to confirm the sustainability of these efforts.