Last update on 2024-06-27

Krones (KRN.DE) - Dividend Analysis (Final Score: 4/8)

Discover Krones (KRN.DE) Dividend Analysis with a Final Score of 4/8, evaluating performance and stability using an 8-criteria system.

Short Analysis - Dividend Score: 4

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

The analysis of Krones' (KRN.DE) dividend policy using an 8-criteria scoring system yields mixed results. Key points include: a dividend yield of 1.5653% slightly below industry average with considerable historical volatility; an impressive but erratic average annual dividend growth rate of 109.35%; a conservative average payout ratio of 48.48%; inconsistent coverage of dividends by earnings and cash flow; notable stability issues with frequent significant decreases in dividend per share; a lack of 25-year dividend consistency; and a steady, albeit modest, stock buyback strategy.

Insights for Value Investors Seeking Stable Income

Due to the volatility in dividend yield, inconsistent dividend growth, and insufficient dividend coverage by earnings and cash flow, investing in Krones (KRN.DE) may be risky for income-focused investors. If you prioritize steady and reliable dividends, Krones might not be the best choice. However, its conservative payout ratio and historical stock repurchases could indicate some potential for those interested in the company's long-term equity management. Further detailed investigation into the company's financial health would be advisable before making an investment 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 how much a company pays out in dividends relative to its stock price. It is an essential metric for income-focused investors, indicating the income generated from an investment in a stock. A higher dividend yield is generally more attractive but could also be a sign of underlying issues in the company if unsustainably high.

Krones' dividend yield for 2023 stands at 1.5653%, which is slightly below the industry average of 1.57%. Over the years, the company's dividend yield has experienced considerable fluctuations, from a high of 21.3301% in 2004 to a low of 0% in 2010, which is quite extreme. Compared to the steadier industry average, Krones' yield appears more volatile. This fluctuation can be seen as a negative trend concerning consistency. Nevertheless, the yield for 2023 shows slight improvement compared to some recent years, indicating a moderate positive trend lately, but still necessitates monitoring.

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 of time. A consistent dividend growth rate higher than 5% is considered healthy as it indicates the company's increasing ability to generate higher dividend payouts over time, enhancing shareholder value.

Evaluating Krones (KRN.DE) over the last 20 years, the Dividend Growth Rate shows significant volatility. For instance, extreme fluctuations like -100% in 2010 and 2233.3333% in 2022 are observed. The average dividend ratio stands at 109.35%, which is far above the 5% mark. Nevertheless, these figures point to erratic dividend payouts rather than steady growth. This inconsistency can be concerning, despite high average growth. A fluctuating dividend may suggest potential instability or cyclical challenges within the company. Thus, while the numbers appear impressive on average, the inconsistency marks this trend as potentially risky for dividend-seeking investors.

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

The payout ratio is a crucial measure that shows the proportion of earnings a company pays to shareholders in the form of dividends. A lower ratio typically indicates sustainability.

Krones (KRN.DE) exhibits an average payout ratio of 48.48% over the last 20 years, which is below the 65% threshold we posed for analysis. This trend is positive, suggesting that Krones has maintained a conservative dividend policy, aligning well with long-term sustainability. However, it's vital to flag some years with extremely high or negative payout ratios. For instance, in 2009, the payout ratio was -53.38%, indicating a potential loss scenario, and in 2019, the payout ratio spiked to 565.91%, which warrants further investigation for extraordinary expenditures or changes in profit margins. These anomalies merit closer scrutiny but do not overshadow the overall positive trend.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings refers to a company's ability to pay dividends to its shareholders out of its net profits. This is important because a company that consistently covers its dividends with earnings demonstrates a generally sustainable practice and financial health. The dividend coverage ratio is calculated as Earnings per Share (EPS) divided by Dividend per Share (DPS).

Analyzing Krones (KRN.DE) from 2003 to 2023, there are inconsistencies in the dividend coverage by earnings, highlighted by several years where EPS was notably low or even negative (-1.124 in 2009, -0.2102 in 2011, and -2.5229 in 2020). The generally accepted threshold for a sustainable dividend coverage ratio is above 2, indicating generations of earnings are sufficient to pay out dividends without leveraging debt. In 2016, for example, the ratio stood at 0.268, meaning the earnings covered only a small portion of dividends, which signals potential financial stress. Conversely, ratios well above 1, like the striking 5.659 in 2019, suggest periods where Krones had significantly robust earnings against dividends payout. Importantly, the extreme negative and low values in certain years indicate volatility and pose risks for dividend reliability despite periodic high coverages seen in years like 2023 (0.246). This trend is concerning and mixed, indicating instability in long-term dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates the company's ability to generate sufficient free cash flow to cover its dividend payments. It reflects financial health and sustainability.

The trend in Krones’ free cash flow from 2003 to 2023 indicates variability, with some years showing negative cash flow, like 2009, 2017, 2019, and 2023. The dividend payout has been increasing since 2010, with notable fluctuations in coverage. Ratios above 1 signify sound coverage, whereas negative ratios indicate inadequate free cashflow to cover dividends. Significant years, like 2023 (-2.21) and 2019 (-0.71), show poor coverage. However, some years such as 2018 (0.395) and 2017 (-0.35) highlight recovery attempts. Overall, the inconsistency is concerning, suggesting the company's dividend payments are not always sustainable based on cash flow.

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%, is of utmost importance for income-seeking investors.

The dividend per share (DPS) history provided for Krones (KRN.DE) over the entire span from 2003 to 2023 shows significant fluctuations that cannot be simply discounted. Notably, there were years with dramatic decreases in DPS, such as from 2007 to 2008, where the DPS fell from 3.4373 to 1.6, a drop of approximately 53.44%. Another pronounced decline can be seen from 2008 to 2009 (a reduction from 1.6 to 0.7, implying a c. 56.25% drop) and yet another plummet from 2018 to 2019, where the payment drops from 1.7 to 0.75—a notable 55.88% decrease. The most stark variance is between 2020 and 2021, with a plunge of over 90%. Income-seeking investors prioritize reliable cash flow; hence such variability would be a negative indicator for them. This volatility infers higher risk for those depending on dividends as a steady income stream, suggesting that Krones has not provided the consistency needed to meet this specific and crucial criterion.

Dividends Paid for Over 25 Years?

Dividends paid consistently over a long period, particularly over 25 years, can indicate a company's stability and shareholder-friendly policies. It showcases the company's ability to generate steady cash flows.

Krones (KRN.DE) has a mixed track record of dividends over the last 22 years, not reaching the desired 25-year mark. There have been fluctuations, with notable years of zero dividends (e.g., 2010), reflecting periods of financial strain. While the trend shows an overall commitment to long-term payouts, it falls short of the 25-year consistency criterion. The inconsistent dividend policy might deter long-term, income-focused investors. Therefore, this trend is not particularly favorable for the prescribed criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases indicate that a company is confident in its financial health and believes its shares are undervalued.

Krones (KRN.DE) shows a pattern of reliable stock repurchases with significant decreases in the number of shares in 2006, 2009, 2010, and 2013. Specifically, the share count dropped from 31593072 in 2005 to 30167651 in 2010. This indicates that the company has used its cash reserves to buy back shares, which likely reflects management's confidence in the company’s valuation and financial stability. The average repurchase rate of 0.0092 over the past two decades suggests a steady but modest stock buyback strategy. Overall, this trend suggests a positive signal to investors, indicating financial health and proactive equity management.