Last update on 2024-06-28

Leidos Holdings (LDOS) - Dividend Analysis (Final Score: 4/8)

Explore Leidos Holdings (LDOS) dividend analysis with a score of 4/8. Find out the stability, growth prospects, and coverage of LDOS dividends in detail.

Short Analysis - Dividend Score: 4

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

The dividend analysis of Leidos Holdings (LDOS) using 8 criteria reveals a mixed performance. The company's dividend yield marginally surpasses the industry average but has been volatile over 20 years, stabilizing recently. The average annual growth rate is inconsistent, showing erratic swings due to periods of negative growth. The average annual payout ratio is below the preferred 65%, indicating the company retains earnings for reinvestment while returning value to shareholders. Dividends have shown fluctuating coverage by earnings and cash flow, raising concerns about consistency. While the company hasn't paid dividends for 25 years, it has maintained stable payouts since starting in 2012 and exhibits a history of credible stock repurchases.

Insights for Value Investors Seeking Stable Income

Given the mixed results of the dividend analysis, potential investors should approach Leidos Holdings (LDOS) with caution. While there are positive aspects like a marginally higher-than-industry-average dividend yield, a favorable payout ratio, and a record of stock repurchases, the inconsistency in dividend growth and coverage raises concerns. It might be worthwhile to monitor the company's future performance for signs of more stable and consistent dividend payments before making significant investments.

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 annual dividend payments to shareholders as a percentage of the stock's price. A higher yield can indicate a rewarding investment for income-focused investors, but it should be sustainable and in line with industry norms to be considered healthy.

Leidos Holdings (LDOS) displays a current dividend yield of 1.3489%, which marginally surpasses the industry average of 1.12%. While a higher-than-average dividend yield is typically favorable for income investors, it's imperative to note that Leidos' dividend yield has experienced considerable volatility over the last 20 years, peaking dramatically in 2016 at 29.1748% before stabilizing to the current levels. The dividend per share has shown a general trend of incremental increases, reaching $1.46 in 2023 from $0.8889 in 2012 after considering fluctuations. Despite the higher yield, the trend of dividend payments suggests a need for scrutiny in its sustainability, given the historical volatility. Additionally, while the stock price has appreciated from $27.9506 in 2012 to $108.24 in 2023, the dividend yield's stabilization at a mark slightly above the industry average could be more promising if coupled with consistent future growth.

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

Dividend Growth Rate measures the percentage increase in dividends paid to shareholders each year over a given period. It's a critical indicator of a company’s financial health and its ability to generate and distribute profits.

Based on the provided dividend ratios, particularly the negative values in some years, Leidos Holdings (LDOS) has shown a highly inconsistent dividend growth. For example, in 2014 and 2017, we observe negative dividend growth rates of -65.1978 and -91.4209, respectively. When evaluating across the 20-year span, calculating the annualize dividend growth rate would likely result in a figure significantly impacted by these erratic swings. The average dividend ratio of 42.74% could give an impression of impressive growth, but this figure is influenced by the few exceptionally high values like 313.7698 in 2013 and 677.0833 in 2016. Given these points, the trend isn't stable and consistent enough to confidently state that LDOS has reliably maintained a Dividend Growth Rate higher than 5% over the past 20 years. Hence, this trend is bad for this criterion as it reflects financial instability or unusual anomalies rather than sustainable growth.

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

The average payout ratio measures the percentage of earnings a company pays to shareholders in the form of dividends. A lower payout ratio, typically below 65%, is desirable as it indicates the company retains more earnings for growth while still providing dividends to shareholders.

Leidos Holdings (LDOS) has had an average payout ratio of approximately 45.87% over the past 20 years. This is well below the 65% threshold, suggesting that the company has retained a significant portion of its earnings for reinvestment while still returning value to shareholders. However, it's notable that some years saw payout ratios significantly above this average, such as 2010 with 126.55% and 2017 with 434.68%. These anomalies might indicate years of lower earnings or higher dividend payouts. Overall, this trend is positive, providing stability and sustainability in dividend payouts.

Dividends Well Covered by Earnings?

Dividends that are well-covered by earnings suggest financial stability and a company's ability to sustain dividend payments, making it a crucial factor for investors interested in income-generating stocks.

From the provided data on Leidos Holdings (LDOS), we can observe some fluctuation in the Earnings per Share (EPS) over the years. Notably, the EPS in 2006 jumps significantly to 20.6 from its previous figures around 4. There's an erratic drop in 2013 and 2015. Despite this volatility, dividends have generally been rising from 0 in earlier years to 1.46 in 2023. When evaluating if dividends are well covered by EPS, a ratio (Dividends per Share covered by EPS) of above 1 indicates good coverage. A figure less than 1 means the company isn't covering its dividends properly with its earnings. Notably, in most years, the ratio falls well below 1, especially notable in 2013 at -0.44. This trend can be problematic. In contrast, a few years like 2010 (1.27) and 2023 (1.01) show adequate coverage. Overall, the mixed results–with certain years showing problematic coverage–may suggest that while there are periods of strong performance, the company faces occasional difficulties in sustaining dividend payments solely from its earnings, representing a somewhat risky trend for income-focused investors."} تنظيفالمجالفق

Dividends Well Covered by Cash Flow?

Dividends covered by cash flow is a measure of a company's ability to pay dividends out of its free cash flow. It is important because it reflects financial stability and flexibility, indicating a company's profitability and efficiency in generating cash to reward shareholders. A higher ratio suggests stronger dividend coverage.

Leidos Holdings (LDOS) has exhibited varying levels of dividend coverage by free cash flow over the years. For instance, in 2007, the coverage was extremely high at approximately 3.85, suggesting excellent dividend coverage during that time. However, it dramatically fell to 0.0071 in 2008 and hovered around very low levels for the subsequent years, indicating poor coverage and potentially riskier dividends during those periods. More recently, the ratio has improved to around 0.21 in 2023, still not ideal but showing some stability compared to the erratic values in earlier years. The trend's good aspect includes improvements since 2008, yet a ratio consistently above 1 would be highly desirable for assurance of dividend payments being well covered by free cash flow.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are significant as they reflect a company's commitment to returning value to shareholders. Investors, particularly those focused on income, prefer companies that offer predictable and consistent dividend payments, which can provide a steady income stream.

Upon analyzing the dividend data of Leidos Holdings (LDOS) over the past 20 years, it is evident that the company started issuing dividends in 2012. From 2012 onwards, there's no instance where the dividend per share dropped by more than 20% from one year to the next. For instance, the company's dividend per share rose from 0.8889 in 2012 to 3.678 in 2013, which is a significant increase. Although there were fluctuations, such as a drop from 13.92 to 1.28 between 2016 and 2017, these changes don't reflect more than a 20% drop per annum on average over the specified period. This consistency can be viewed positively as it underscores Leidos Holdings' ability to sustain dividends, making it potentially attractive to income-focused investors. However, it is pertinent to consider the one-time significant rise and dip which might have distinct underlying reasons warranting further investigation.

Dividends Paid for Over 25 Years?

Dividends paid consistently for over 25 years indicate company stability and a commitment to returning value to shareholders.

Leidos Holdings (LDOS) has not paid dividends for over 25 years. According to the data, the company only started paying dividends in 2012 with an initial payout of $0.8889 per share. Although dividends have been paid consistently since then, the period of historical payout covering only 11 years does not satisfy the criterion of 25 years. Therefore, while the recent trend in dividend payouts is positive, this does not meet the standard for indicating long-term dividend payment stability. This lack of a 25-year history in dividends might be seen as less attractive for income-focused long-term investors.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Leidos Holdings (LDOS) and why it is important to consider

Reliable Stock Repurchases Over the Past 20 Years is an essential criterion for Leidos Holdings (LDOS). It is important because regular stock repurchases indicate management's confidence in the company's future prospects. By reducing the number of outstanding shares, earnings per share (EPS) can increase, potentially driving up the stock's price. Over the last 20 years, Leidos Holdings has varied its number of shares year-over-year. Notably, between 2006 and 2013, the number of shares steadily decreased from 45 million to 74 million, indicating consistent repurchase activity. This trend briefly reversed in 2017 and 2018 when shares increased to 154 million and 143 million, respectively, but has since stabilized around 137-141 million between 2019 and 2022. With 13 out of 20 years showing reliable stock repurchases, Leidos has, on average, reduced its share count by 5.0688% annually. Given this, the trend appears favorable, demonstrating management's commitment to returning value to shareholders. However, the unusual spikes in 2017-2018 warrant a closer examination to understand this deviation.