Last update on 2024-06-27

KWS SAAT SE (KWS.DE) - Dividend Analysis (Final Score: 3/8)

Analyze the dividend performance of KWS SAAT SE (KWS.DE) through an 8-criteria scoring system, revealing stability and sustainability insights.

Short Analysis - Dividend Score: 3

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

The dividend analysis for KWS SAAT SE (KWS.DE) using an 8-criteria scoring system resulted in a relatively average score. This company has shown conservative dividend yield strategies over the years. Although the dividend yield is below the industry average at 1.676%, the company has a consistent pattern of maintaining stability in its dividend payments even during economic downturns. On the contrary, the average annual payout ratio of 96.94% over the last 20 years raises red flags as it is well above the sustainable threshold of 65%, suggesting potential challenges in maintaining this payout level. Moreover, the ability of the company's earnings to cover its dividends has decreased significantly in recent years. The examination of cash flow coverage fluctuates, but an improving trend has been identified post-2015. Despite the occasional cash flow issues, dividend payments have not faced major disruptions, reinforcing a slight positive trend in company stability for these payouts.

Insights for Value Investors Seeking Stable Income

Investors looking for high immediate income might not find KWS SAAT SE (KWS.DE) attractive due to its lower than industry average dividend yield. However, those focused on long-term growth could appreciate the company's strategy of retaining earnings for reinvestment. The company presents reliability in maintaining payouts but shows historical volatility and high payout ratios that might concern risk-averse dividend investors. Therefore, it could be worth considering for growth-focused investors, but with caution given the historical fluctuations and higher payout ratios. Careful monitoring of the company's financial health and dividend policies is recommended for a balanced investment approach.

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 dividend payment as a percentage of the stock price. It provides investors with an idea of how much cash flow they are getting back on their investment, relative to other assets. A higher yield can be attractive, but it's important to consider it in the context of industry averages and trends, as an unusually high yield can sometimes signal underlying issues with the company.

KWS SAAT SE's dividend yield is at 1.676%, currently below the industry average of 4.37%. Over the last 20 years, their yield has notably fluctuated, reaching extraordinary highs in the early 2000s (111.1111% in 2003) and stabilizing to more modest levels in recent years, reflecting an evolving payout strategy. This low yield trend suggests a conservative dividend approach and an indication that the company might be retaining earnings for reinvestment rather than distributing profits to shareholders. For potential investors, the low yield relative to the industry average could be seen negatively, particularly for those seeking immediate income, while growth-oriented investors might perceive this as a sign the firm is reinvesting in long-term growth. Additionally, the increasing stock price culminating at 53.7 in 2023, from 9.9 in 2003, and incremental dividend per share rising to 0.9 in 2023 from 11 in 2003 indicates a conservative but steady return to investors. However, it is crucial to examine this with growth and income preferences in mind in future investment considerations.

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

Explain the criterion for KWS SAAT SE (KWS.DE) and why it is important to consider

The criteria of having a Dividend Growth Rate higher than 5% over the last 20 years is crucial for assessing the company's ability to consistently increase its dividend payouts, which is a key metric for income-focused investors. Dividend growth is often seen as a signal of corporate health and performance. A steadily growing dividend payout can also help to protect earnings from inflation and contribute to the compounding of returns over time.

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

The payout ratio represents the proportion of earnings a company distributes to its shareholders in the form of dividends. A lower payout ratio typically indicates that the company is retaining more earnings for growth and stability. An average payout ratio under 65% is often considered sustainable and prudent for long-term success.

The average payout ratio for KWS SAAT SE over the last 20 years is significantly higher than the optimal threshold of 65%, sitting at 96.94%. Several years, particularly in the mid-2000s, exhibit extremely high payout ratios (e.g., 2007 with 1027.146%). A payout ratio higher than 100% suggests that the company is paying out more in dividends than it earns, which can be unsustainable in the long run. However, in more recent years, the payout ratio has been well below 65%, indicating a more balanced and possibly sustainable approach in recent times. Nevertheless, the historical average being so high is a potential red flag for dividend sustainability.

Dividends Well Covered by Earnings?

The criterion checks if a company's dividends are sufficiently covered by its earnings. This is crucial because dividends should be paid out of earnings, not from other sources like debt. High earnings coverage indicates financial health and sustainability of dividend payments.

Analyzing KWS SAAT SE's EPS and DPS over the years reveals a key trend: post-2007, a significant decline in the 'Dividends per Share covered by Earnings per Share' metric is observed. For instance, in 2007, the ratio was very high at 10.27, indicating that earnings far exceeded dividends paid. However, from 2013 onwards, the ratio has predominantly remained below 1, indicating dividends are more or less linearly related to earnings or less. Notably, in recent years (2021 onwards), earnings cover dividends by a margin below 0.25, suggesting the company is paying nearly all or a significant portion of its earnings as dividends. This trend, potentially driven by decreasing EPS alignments or stable DPS policies, is not ideal as it implies limited room for reinvestment or shocks. This could hint at issues with future growth prospects or the sustainability of the current dividend policy. The overall trend needs scrutiny to ensure long-term dividend stability, possibly indicating the requirement for a balanced payout and reinvestment strategy.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that a company's free cash flow is sufficient to cover its dividend payments. This criterion is important because it indicates financial stability and the company's ability to sustain its dividend payouts.

For KWS SAAT SE (KWS.DE), the trend of free cash flow coverage of dividend payouts has varied significantly from 2003 to 2023. In years such as 2012 and 2015, the free cash flow was negative, indicating that the company's free cash flow could not cover the dividend payouts, with coverage ratios of -4.21 and -0.43, respectively. Conversely, in 2022 and 2014, this ratio was remarkably high at 4.28 and 1.68, respectively, suggesting strong coverage. In the most recent year, 2023, the coverage ratio stands at 0.75, which indicates that the free cash flow is sufficient to cover the dividends though it is not as robust as in the peak years. Overall, while there have been fluctuations, the ability to cover dividends from free cash flow shows an improving trend, especially since the latter half of the decade from 2015 onwards, which is a promising sign for financial stability. However, the years of negative coverage highlight periods of vulnerability that investors need to be mindful of.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a long period, such as the past 20 years, are crucial for income-seeking investors. These investors prioritize reliable income, and frequent or significant cuts in dividends can undermine the attractiveness of an investment for them. Stability reflects the company's stable cash flow and financial health.

Reviewing the dividend payments of KWS SAAT SE (KWS.DE) over the past 20 years shows a general pattern of stability with slight fluctuations. There is no year where the dividend per share dropped by more than 20%, affirming the company's ability to maintain consistent payouts. For instance, even during the global financial crisis of 2008-2009, KWS SAAT SE managed to sustain relatively stable dividends, reflecting robust cash flows. Despite a notable drop in dividends in 2015, the dividends picked up and the recent trends hover between 0.6 and 0.9 per share, indicating care to ensure shareholder returns. This stability is beneficial and good for KWS SAATSE, as maintaining a trend without a 20% drop represents reliability, enhancing investor confidence.

Dividends Paid for Over 25 Years?

A company's ability to consistently pay dividends for over 25 years indicates stable profitability and strong financial health, making it a crucial factor in evaluating long-term investment potential.

KWS SAAT SE has not consistently paid dividends for 25 years, as their dividend per share history shows interruptions and fluctuations. For instance, dividends were modestly growing until 2007, after which a severe drop can be observed in 2008. Similarly, the substantial decrease in 2015 and subsequent inconsistent payments indicate instability in their dividend policy. Although dividends have been more stable and gradually increasing in recent years (for example, from 0.64 in 2015 to 0.9 in 2023), the company's dividend payment history lacks the long-term consistency and reliability often sought by dividend-focused investors. This inconsistent trend may signal underlying financial instability or changing company strategies, which might lower the company's attractiveness as a stable dividend-paying stock.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for KWS SAAT SE (KWS.DE) and why it is important to consider

Stock repurchases refer to a company buying back its own shares from the marketplace, reducing the number of outstanding shares. This criterion is crucial as it can be an indicator of a company's confidence in its own future prospects, and can also serve to increase the value of remaining shares. Analyzing the consistency and amount of stock repurchases over an extended period, like 20 years, provides insight into the company’s long-term financial strategy and health.