Last update on 2024-06-28

LEG Immobilien (LEG.DE) - Dividend Analysis (Final Score: 4/8)

Analyze the performance and stability of LEG Immobilien's dividend policy using an 8-criteria scoring system. Discover insights on its dividend score.

Short Analysis - Dividend Score: 4

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

LEG Immobilien (LEG.DE) received a Dividend Score of 4 out of 8 based on its examination against 8 criteria. The company's dividend yield has shown significant volatility, reaching highs of 6.69% but dropping to 0% in 2023, which is concerning for income-focused investors. The Dividend Growth Rate has been inconsistent and below the 5% annual growth target over the last 20 years. The Payout Ratio, however, has been mostly conservative and below the 65% threshold. While dividends were covered by earnings and cash flows most times, recent fluctuations and discontinuations raise doubts about sustainability. The dividends have not been stable for a full period, only paid since 2013, hence failing longevity criteria. The company lacks commitment to stock repurchases with notable share issuances and minimal buybacks, raising concerns about their strategy for returning value to shareholders.

Insights for Value Investors Seeking Stable Income

Given the inconsistent dividend policy and the drastic drop to 0% dividend yield in 2023, LEG Immobilien may not be the best choice for investors seeking stable and reliable income through dividends. The unsustainable dividend growth and recent earnings concerns add further risk. Although the company has a conservative payout approach, the unstable dividend coverage and minimal stock buyback commitment suggest potential issues in long-term financial strategy. Investors should delve deeper into the company's future cash management and dividend policies or consider more stable alternatives if consistent revenues are a priority.

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 is a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. This is important because it gives investors an idea of the income they can expect from holding the stock.

LEG Immobilien's dividend yield shows significant volatility over the past 20 years. It started paying dividends in 2013 with a yield of 0.9546%, increased to peaks like 5.6666% in 2020, and hit a high of 6.6875% in 2022, before crashing to 0% in 2023. The industry's average yield during this time also showed irregular fluctuations but generally remained more stable compared to LEG's yield. The drastic drop to 0% in 2023 is concerning, especially when the industry average was at 2.99%. This suggests that shareholders may not receive expected returns in the form of dividends, making the stock potentially less attractive for income-focused investors. The pattern indicates a considerable inconsistency in the company's dividend-paying capacity, likely influenced by various internal and external factors. Additionally, the company's stock prices have shown fluctuations, reaching a high of €127.06 in 2020, then dropping to €60.86 in 2022, which might correlate with its varying dividend yields. Overall, this trend is not favorable for income investors who seek stable and predictable dividend income.

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

The Dividend Growth Rate indicates how much a company's dividend payments to shareholders have increased over a specified period, typically annually. Companies with a consistent and high dividend growth rate of over 5% suggest robust financial health and a commitment to increasing shareholder value. This criterion is fundamental for long-term investors who seek increasing income streams from dividends.

When examining LEG Immobilien's dividend data from 2008 to 2023, it's notable that the Dividend per Share (DPS) figures are quite volatile. Specifically, there were several years of no dividend payments (2008-2013) and significant fluctuations afterwards. For example, the DPS ratio jumped to 321.95 in 2014 from 0 in previous years, then followed a sporadic trend: 13.29 (2015), 15.30 (2016), and 22.12 (2017). In 2022 and 2023, the DPS ratios were negative, at -47.5 and -100, respectively. The average Dividend Ratio amounts to 22.69, which suggests irregularity. Hence, although some years have seen high increases, the inconsistency and the presence of substantial negative figures in recent years imply that LEG Immobilien's Dividend Growth Rate is not reliably higher than 5% annually over the last 20 years. This trend is unfavorable for investors prioritizing consistent dividend growth.

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

The average payout ratio is a key metric to evaluate if LEG Immobilien is distributing a sustainable portion of its earnings to shareholders as dividends.

Based on the data provided, LEG Immobilien has maintained an average payout ratio of 25.84% over the past 16 years, which is significantly lower than the 65% threshold. This trend indicates a conservative approach to dividend payouts, ensuring that a substantial portion of earnings is plowed back into the company. Except for 2022, with an outlier payout ratio of 127.85%, the company has consistently kept the payouts at manageable levels. For investors, this conservative payout policy provides a reassuring sign that the company prioritizes long-term growth and financial stability. Therefore, the trend is good from the perspective of both dividend sustainability and long-term capital appreciation.

Dividends Well Covered by Earnings?

The criterion looks at whether the company's earnings per share (EPS) are sufficient to cover its dividend payments. This is essential to determine the sustainability of the dividend policy.

From 2008 to 2012, LEG Immobilien did not pay any dividends, correlating with periods of negative EPS, indicating insufficient earnings. The positive trend starts in 2013, with dividends per share covered partially by earnings. Coverage ratios around or above 1 indicate good coverage: for instance, 2014 (0.59x), 2020 (0.37x), and dramatically in 2022 (1.28x). However, significant EPS drop or negative EPS in 2023 (-21.1674) results in no dividend, reflecting poor performance resilience. The fluctuating coverage ratio reveals inconsistency in profitability, posing concerns about long-term dividend sustainability, particularly given the negative EPS in 2023.

Dividends Well Covered by Cash Flow?

Dividends being well covered by cash flow is an essential indicator of a company's dividend sustainability. It shows whether a company generates sufficient free cash flow to cover its dividend payouts without having to dip into its reserves or take on debt. A higher ratio indicates better coverage and a more sustainable dividend policy.

Between 2011 to 2021, LEG Immobilien's free cash flow grew significantly from €70.9 million to a peak of €342.4 million, showing robust growth and an impressive trend. Correspondingly, the dividend payout amount also witnessed an upward trend but not to the same extent, rising from €9.8 million in 2011 to €185.6 million in 2021. This ratio indicates how comfortably the dividend payments are covered by free cash flow. For example, in 2014, the dividend covered by cash flow was approximately 63.7%, meaning that around 63.7% of free cash flow was used to pay dividends, leaving a substantial buffer for other uses. However, in recent years, specifically in 2022 and 2023, there is a notable deviation. In 2022, the coverage ratio was around 59%, which although shows a reduction, still maintained a relatively healthy margin. However, the discontinuation of dividends in 2023 signals a significant structural change. This could be a cause for concern and warrants closer inspection of the company's future cash flow projections and reinvestment strategies to fully understand the ramifications and outlook. Overall, the trend was good but caution is needed due to recent changes.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends mean that company is generating consistent profits, which translates to regular income for shareholders and highlights sustainability of its business model.

Examining the dividends per share for LEG Immobilien over the past 20 years reveals a notable trend. The company began paying dividends in 2013 and subsequently showed consistent increases upto 2020, reflecting positively on its financial health. However, there's a significant fluctuation in recent years; from 7.2 in 2020 to 3.78 in 2021, indicating over a 40% drop, and then a drop to 0 in 2023. Such volatility is concerning for income-seeking investors, as it breaks the pattern of stability. Therefore, LEG Immobilien fails to meet the stability criterion fully.

Dividends Paid for Over 25 Years?

Investors look for companies that have a long track record of paying dividends, ideally over 25 years, as this signifies financial stability and trustworthiness.

Analyzing the given data for LEG Immobilien (LEG.DE), it becomes apparent that the company has only been paying dividends since 2013. The initial dividends started at €0.41 per share and saw a generally increasing trend, peaking at €7.2 per share in 2020. However, after 2020 the dividends started to decline, and in 2023, no dividend was paid out. The overall limited history of 11 years falls short of the 25-year benchmark and the recent halt in dividend payments is notable, indicating potential issues with profitability or cash flow, making this a negative trend for long-term dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are crucial indicators of a company's commitment to returning value to its shareholders. Consistent buybacks can signal strong cash flow and confidence in the company's future performance.

When examining LEG Immobilien (LEG.DE) over the past 20 years, we see that there has been a noteworthy level of variability in the number of shares, starting at 18,163,620 in 2008 and increasing to 74,109,276 by 2023. Particularly striking is the sharp increase from 18,163,620 shares in 2013 to 52,963,944 in 2013, indicating significant issuances of new shares, possibly for capital raising purposes. However, reliable repurchases were only noted in 2019, which does not provide a strong case for consistent value return through buybacks. The average repurchase level stands at a negligible 15.1885%, suggesting minimal impact from buybacks overall. This trend raises concerns about the company’s commitment to shareholder value through stock repurchases, especially in a sector where asset-heavy operations might require considerable capital investments. Therefore, it would be prudent for investors to investigate these issuance and buyback strategies further to understand their implications on equity value and shareholder returns.