Last update on 2024-06-28

Koninklijke KPN (KPN.AS) - Dividend Analysis (Final Score: 6/8)

Explore the dividend performance and stability of Koninklijke KPN (KPN.AS) with an in-depth analysis of its 8-criteria scorecard, achieving a final score of 6/8.

Short Analysis - Dividend Score: 6

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

This analysis evaluates the dividend performance and stability of Koninklijke KPN (KPN.AS) based on eight criteria. Koninklijke KPN has a current dividend yield of 4.7115%, which is higher than the industry average, indicating strong potential returns. While the company has an impressive average annual dividend growth rate of 31.57% over the past 20 years, the growth has been highly inconsistent. The payout ratio is comfortably below the 65% threshold on average, suggesting a balanced and sustainable dividend policy. However, both earnings and cash flow coverage of dividends show mixed stability, with several years of undercoverage raising concerns about sustainability. Historical dividend payments have not been stable or consistent, with notable gaps in several years and sharp drops. Additionally, while stock repurchases have occurred sporadically, they lack regularity. Overall, Koninklijke KPN demonstrates some strengths but also notable weaknesses in its dividend policy.

Insights for Value Investors Seeking Stable Income

Koninklijke KPN (KPN.AS) has a relatively strong dividend yield and historical growth rate, but its inconsistency in dividend payments, coverage, and stock repurchases might be a concern for investors seeking stable income. If you are an income-focused investor looking for reliable dividends, you might want to explore other options with more stable records. However, if you are willing to take on some risk for potentially higher returns, KPN could still be worth considering, keeping an eye on its future performance and cash flow projections.

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 represents the ratio of a company's annual dividend compared to its stock price. It helps investors understand how much return they are getting on their investment in the form of dividends.

Koninklijke KPN's (KPN.AS) current dividend yield of 4.7115% is considerably higher than the industry average of 3.56%, indicating a strong return on investment for shareholders purely from dividends. Historically, KPN's dividend yield has fluctuated significantly, reaching as high as 30.6258% in 2012 and experiencing low points such as 0% in 2013. More recently, the yield has stabilized in the 4-5% range, suggesting a more consistent payout pattern. The higher current yield is favorable, assuming the company can maintain this payout level. Compared to the industry, KPN provides better immediate income potential, which is a positive trend for income-focused investors.

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 payments. A growth rate higher than 5% indicates a strong and growing dividend policy.

Reviewing the Dividend Growth Rate (DGR) for Koninklijke KPN (KPN.AS) over the past 20 years, the values show significant volatility. There are several years with negative growth, sharp drops, and also years with exceptionally high dividend increases. However, the overall average stands at approximately 31.57%, which is well above the 5% benchmark. While a high average DGR might indicate strong performance, the inconsistency and occurrence of multiple negative growth periods illustrate volatility and may not provide a stable expectation of future dividends. This trend presents a mixed picture: while the average growth is excellent, the unpredictability diminishes the reliability of the dividends, which could be a concern for some investors.

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

A lower average payout ratio is important as it indicates financial stability and sustainability in dividend payments. It shows the proportion of earnings paid out as dividends to shareholders.

The average payout ratio of Koninklijke KPN (KPN.AS) over the last 20 years is approximately 44.58%, which is comfortably below the 65% threshold. This trend indicates a good balance between distributing dividends to shareholders and retaining earnings for reinvestment. Despite some years with alarmingly high payout ratios like 178.94% in 2004 and 196.26% in 2018, the overall average staying below 65% is a positive indicator of financial prudence and sustainable dividend policy. Years with 0% could indicate reinvestment in business or recovery phases.

Dividends Well Covered by Earnings?

Dividend coverage ratio elucidates whether a firm's current earnings can comfortably cover its dividend payments. This metric serves as a critical indicator for investors focusing on dividend stability and potential growth, assessing the company’s ability to sustain dividend payouts during varying economic conditions.

Koninklijke KPN's dividend coverage over the years has experienced significant volatility. For instance, in 2004, the coverage ratio was 1.79, suggesting earnings sufficiently covered the dividend. However, during numerous years, particularly 2005, 2006, 2013, and others, the coverage ratio was zero, signaling gaps when earnings did not cover dividends. Recent years like 2017 to 2021 have witnessed moderately healthy coverage ratios, averaging around 1 except for lower figures like 0.42 in 2021. Such inconsistency illustrates a mixed trend, adding red flags concerning dividend sustainability. The lack of steady earnings to cover dividends consistently emphasizes the necessity for investors seeking reliable income to approach with caution.

Dividends Well Covered by Cash Flow?

The criterion for 'Dividends Well Covered by Cash Flow' assesses whether a company's generated cash flow is sufficient to cover its dividend payouts. A coverage ratio greater than 1 indicates that the company generates more cash than it pays out in dividends, which is generally a healthy sign of dividend sustainability.

Analyzing Koninklijke KPN's (KPN.AS) dividend coverage by free cash flow from 2017 provides a mixed outlook. While the 2017 and 2018 coverage ratios are approximately 0.63, indicating that the dividends are not fully covered by the free cash flow, an impressive shift occurs in 2020, with a ratio of 1.10. This suggests that, in 2020, KPN was able to generate enough free cash flow not only to cover its dividend payouts but also to retain some surplus cash. However, the declining ratios in 2021 (0.61) and 2022 (0.58) highlight sustainability concerns once again. The latest ratio in 2023, standing at 0.59, still implies undercoverage. Although the trend was positive in 2020, the subsequent decline indicates that KPN needs to improve its free cash flow generation to ensure sustainable and well-covered dividends. This mixed trend underscores the need for potential investors to cautiously evaluate KPN's future cash flow projections and their alignment with dividend commitments.

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.

Upon examining the historical dividends per share of Koninklijke KPN (KPN.AS) over the past two decades, it's evident that there have been significant fluctuations. For instance, dividends per share dropped from 1.2839 EUR in 2007 to 0.56 EUR in 2008, which is a drastic decline. Moreover, in 2013, the company entirely skipped its dividend payment, dropping from 0.69 EUR in 2012 to 0 EUR. This was followed by a period of very modest dividend payments from 2014 to 2017, where dividends per share were mostly below 0.4 EUR. Although there has been a gradual increase in dividends since 2018, reaching 0.147 EUR in 2023, the historical inconsistency presents a cautious scenario for income-seeking investors. Overall, Koninklijke KPN (KPN.AS) has not demonstrated stable dividends over the past 20 years, which could be considered a negative trend for those prioritizing consistent income.

Dividends Paid for Over 25 Years?

The criterion checks if the company has consistently paid dividends to its shareholders over a long period, typically 25 years. Consistency in dividend payments is a sign of financial stability and commitment to returning value to shareholders.

Koninklijke KPN has not paid dividends continuously over the past 25 years. For several years between 2000 and 2002, as well as 2013 and 2014, no dividends were issued. Although the company resumed dividend payments afterward, the interruption during those years indicates inconsistency. Specifically, no dividends were paid in 2001, 2002, 2003, 2013, and barely in 2014 with just €0.02 per share. Despite stable payments since 2015, the gaps suggest that KPN does not meet this criterion of uninterrupted dividend payments. This trend is not good as it reflects periods of financial instability or strategic decisions to retain earnings rather than distribute them to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the company's consistency and commitment to buying back its own shares over a long period, generally viewed as a bullish sign and a return of value to shareholders.

Over the past 20 years, Koninklijke KPN has had several years where stock repurchases were noted (2005, 2011, 2014, 2019, 2021, 2022, 2023). The average repurchase rate of -2.5702 suggests a net reduction in shares, indicating a shareholder-friendly trend. However, the sporadic nature of these repurchases implies inconsistency. While average net buybacks are positive, the lack of regular buybacks every year could mean strategic repurchases as opposed to ongoing commitment. Therefore, while generally positive, this trend could have been more favorable if more regular.