Last update on 2024-06-27

KBC Group SA/NV (KDB.F) - Dividend Analysis (Final Score: 4/8)

Explore our in-depth dividend analysis of KBC Group SA/NV (KDB.F) for 2023. Understand dividend performance, stability, and trends. Learn more now!

Short Analysis - Dividend Score: 4

We're running KBC Group SA/NV (KDB.F) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for KBC Group SA/NV (KDB.F) uses 8 criteria to assess performance and stability. Despite a high current dividend yield of 6.83%, it's historically volatile. The average annual growth rate is inconsistent, and the payout ratio exceeds 65%, suggesting poor dividend sustainability. Dividends are now well-covered by earnings but inconsistently by cash flow. The dividends show stability in recent years but have not been paid out consistently over 25 years. Stock repurchases have been reliable but modest.

Insights for Value Investors Seeking Stable Income

While KBC Group SA/NV's high dividend yield and the recent stability in dividend coverage by earnings are positive, the historical volatility, inconsistent growth, high payout ratios, and gaps in the historical dividend payments are concerns. Therefore, investors should be cautious and consider these risks before investing for dividends.

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?

The dividend yield measures the dividend income relative to the share price, showing how much cash flow you are getting for each dollar invested in an equity position.

KBC Group SA/NV's current dividend yield of 6.8306% is significantly higher than the industry average of 2.76%. Historically, KBC's dividend yield has been highly variable, peaking at 17.2998% in 2008 and hitting lows in several years where no dividends were paid. The higher-than-average current yield indicates that the company is returning a substantial portion of its earnings to shareholders, which can be attractive to income-focused investors. However, the variability seen in the historical data suggests potential instability in dividend payments, which might concern risk-averse investors. Despite these fluctuations, the current high dividend yield, combined with a recent increase from 3.2122% in 2021 to 6.8306% in 2023, shows a positive trend in the company's dividend policy. Therefore, the high dividend yield is a good sign for those seeking income but should be analyzed in the context of its historical volatility.

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

Dividend Growth Rate represents the annualized percentage rate of growth of a company’s dividend payout. This rate is critical as it indicates the company's ability to generate income and reward shareholders consistently.

In examining KBC Group SA/NV (KDB.F)'s dividend growth rate over the last 20 years, we see a substantial variation including negative years: 2009 -100%, 2010 -98.6667%, 2014 -100%, and recent years of 2018 -28.5714%, 2021 -2.4%, and 2023 -28.5714%. However, the company also reported high growth in one spectacular year: 2013 with a 9900% increase, significantly impacting the average dividend growth rate of 467.8623%. Despite the extreme fluctuations, the welcome growth rates in other years like 2019 (16.6667%) and 2020 (129.5082%) do not compensate for negative years sufficiently. Therefore, with such inconsistency and including heavy fluctuations, a sustainable and consistent dividend growth rate above 5% does not seem achievable over this duration.

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

Average Payout Ratio

The average payout ratio over the last 20 years is 113.92%, which is above the acceptable threshold of 65%. This is generally considered bad for this criterion. Notably, the payout ratio spiked dramatically in 2011 to 1958.22%, likely causing this heightened average. The payout ratio exceeding 100% in several years, particularly in 2009, 2011, and the recent spike in 2020, indicates periods where the company has distributed more in dividends than what it earned. Furthermore, consistently unstable payout behavior reveals poor dividend sustainability principles over the analyzed period. To foster an enduring dividend policy, KBC Group SA/NV needs to stabilize its payout ratios closer to, or ideally below, the 65% threshold.

Dividends Well Covered by Earnings?

Dividends are typically evaluated on whether they are covered by the company's earnings. This is tested by examining if the company's Earnings per Share (EPS) exceed its Dividend per Share (DPS). If EPS is consistently greater than DPS, it implies that the company generates enough income to support its dividend payments, reducing the risk of dividend cuts.

The analysis for KBC Group SA/NV (KDB.F) over the years highlights interesting observations. During the financial crisis of 2008 and 2009, the EPS was negative, and consequently, the dividends were either zero or minimal, reflecting prudent financial management. From 2010 onwards, the relationship between EPS and DPS generally improved. Particularly concerning marks like 2012, 2013, and 2015, where the dividend was a negligible fraction of EPS (0.005x, 0.41x, 0.31x respectively), indicate very conservative payout ratios, suggesting reinvestment into the company or cash reserves build-up. One remarkable year is 2010, with a DPS to EPS of 19.58x—it looks as if a high dividend payout was kept despite marginal earnings, possibly as a shareholder reassurance measure. More recent years, like 2022 and 2023, show sound coverage ratios of 0.82x and 0.48x, indicating stable dividend policies supported by healthy earnings. Overall, the trend reflects a more disciplined and sustainable approach post-crisis, marking it as a positive evolution. Most recent years illustrate that the dividends are well-covered by earnings, indicating current stability.

Dividends Well Covered by Cash Flow?

Examining if dividends are well covered by cash flow ensures the company can sustain its dividend payouts without risking financial stability.

Over the period from 2003 to 2023, KBC Group SA/NV has had an irregular trend of free cash flow and dividend coverage. In several years, the company's free cash flow was negative, such as in 2004, when it was -€2.8 trillion, and 2023, with -€21.5 billion. This was reflected in the dividend coverage ratios, which were also negative in those years (-0.142 in 2004 and -0.077 in 2023). Notably, during some positive cash flow years like 2020 and 2021, the dividend coverage improved to 0.0019 and 0.109, respectively. Nevertheless, the inconsistency and frequent negative coverage ratios indicate that KBC Group's dividends are not consistently well-covered by cash flow, posing potential risk to dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are a key indicator that an income-seeking investor seeks to ensure a consistent and predictable income stream. A company's capability to sustain or gradually increase its dividend outputs without drastic reductions mirrors its ability to generate stable revenue and profit, making it a more reliable investment option.

In analyzing KBC Group's dividend per share data over the last 20 years, several key insights emerge. Despite some years of non-payment, which were likely due to economic conditions, the data suggest an overall trajectory of growth, particularly in recent years. Notably, KBC Group managed to avoid any year-to-year drop exceeding 20%, which is favorable for stability. For instance, while the dividends experienced some inconsistencies, such as drops from 3.78 (2008) to 0 (2009) and surges from 2.44 (2021) to 5.6 (2022), none of these fluctuations on a year-over-year basis were more than 20%. This indicates resilience, especially after overcoming the aftermath of the 2008 financial crisis and dealing with more recent economic turbulence. Overall, KBC Group's trend in this criterion is positive, illustrating they have reestablished and sustained more stable dividend scenarios in the latter 10 years than in the previous decade.

Dividends Paid for Over 25 Years?

Assessing whether a company has paid dividends for over 25 years is crucial as it demonstrates reliability, financial health, and a commitment to returning value to shareholders over the long term.

The data for KBC Group SA/NV (KDB.F) shows a patchy dividend payment history since 2001. We see many years, especially in the earlier part of this century, with no dividends paid at all (e.g., 2001–2007, 2009–2011, 2014). However, since 2015, there is a more consistent trend of annual dividend payments, including noteworthy increases over time, culminating in relatively high dividends in recent years, with a peak of 5.6 in 2022. Despite this recent consistency, the historical gaps suggest that the company has not reliably paid dividends for over 25 years. This sporadic payment history could be a red flag for investors seeking stability in dividend returns.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's confident capital management and strong financial health, rewarding shareholders by potentially increasing the stock's earnings per share (EPS).

The data shows that KBC Group SA/NV (KDB.F) repurchased shares reliably in the years 2006, 2007, 2008, 2009, 2018, 2019, and 2023. Comparing the number of shares year-over-year, there were notable reductions during these years, reflecting proactive capital management. For instance, the number of outstanding shares decreased from 357.5 million in 2006 to 348.4 million in 2007 and 341 million in 2008. The average repurchase rate over the past 20 years is 1.5897%, indicating that KBC has been relatively modest yet consistent in its buyback efforts. This trend can be seen as favorable, given it suggests consistent strategic buybacks which are beneficial to shareholders by improving EPS and often inflating stock value. However, the relatively lower execution in recent years, could raise questions on whether the company sees better investment opportunities elsewhere or if future buyback plans could become less frequent.