Last update on 2024-06-27

Littelfuse (LFUS) - Dividend Analysis (Final Score: 6/8)

Littelfuse (LFUS) - Dividend Analysis scored 6/8. How stable and reliable are its dividends? Learn what each criterion reveals.

Short Analysis - Dividend Score: 6

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

Littelfuse (LFUS) has been evaluated for its performance and stability in dividend policy using an 8-criteria scoring system, achieving a score of 6. Here's a brief analysis based on each criterion: 1. **Dividend Yield**: Littelfuse has a dividend yield of 0.9344%, higher than the industry average of 0.77%, making it attractive to income-focused investors. 2. **Dividend Growth Rate**: The growth rate has been inconsistent over the past 20 years, with significant peaks and troughs, which indicates volatility and potential unreliability in dividend growth. 3. **Payout Ratio**: With an average payout ratio of 15.19% over the last 20 years, LFUS shows financial prudence, retaining a majority of its earnings for growth and stability. 4. **Dividends Cover by Earnings**: Consistently covered by earnings since 2010, though recent years show slight dips necessitating monitoring. 5. **Dividends Cover by Cash Flow**: Dividends are well covered by cash flow, with a strong upward trend in free cash flow from $36 million in 2003 to over $371 million in 2023. 6. **Dividend Stability**: Post-2010, dividends have been consistently raised but showed inconsistency before. Some significant drops in dividend amounts are concerning. 7. **Dividend History**: Littelfuse has not paid dividends for over 25 years; it only started in 2011, which means it lacks a long-standing history. 8. **Stock Repurchases**: Reliable repurchases in 9 out of the last 21 years, indicating mixed but somewhat positive capital allocation strategies.

Insights for Value Investors Seeking Stable Income

Littelfuse (LFUS) seems to offer a potentially interesting investment, especially for income-focused investors, due to its higher-than-average dividend yield and prudent payout ratio. However, the inconsistent dividend growth rate and the company's relatively short history in paying dividends are cautionary flags. Additionally, while their dividends are well covered by both earnings and cash flow, the volatility in dividend stability suggests a need for careful consideration. Given these factors, it may be worth keeping LFUS on your watchlist but investigating further into its overall long-term business growth and stability before making a significant investment.

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?

Explain the criterion for Littelfuse (LFUS) and why it is important to consider

Littelfuse (LFUS) has a current dividend yield of 0.9344%, which is higher than the industry average of 0.77%. The dividend yield is an important figure as it indicates the annual return on investment for shareholders from dividends alone. High dividend yields are typically attractive to income-focused investors, providing a comparative measure of a stock’s yield against both industry standards and broader market indices.

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

Dividend Growth Rate refers to the annualized percentage rate of growth that a particular stock's dividend achieves over a period. A consistent high dividend growth rate indicates a strong business model and robust earnings growth, which is essential for long-term investors focusing on dividend income. A rate higher than 5% is generally considered good.

Littelfuse ({LFUS}) has exhibited varying annual dividend growth rates in the past 20 years. The company's dividend growth rate appears inconsistent, with significant peaks and troughs. Since 2003, it started issuing dividends from 2011. While there are notable high points like 340% in 2011 and considerable incremental value in following years, the rates in 2020 and 2021 saw a significant drop of close to 60%. This wide fluctuation suggests inconsistent dividend policies and earnings volatility, making the over 5% average somewhat unreliable in representing steady growth. Despite the average dividend ratio being 22.9254%, which seems promising, the erratic pattern calls for cautious interpretation.

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

Why is it important that Littelfuse (LFUS) has an average payout ratio lower than 65% in the last 20 years? Include the importance of the payout ratio in dividend analysis.

A payout ratio measures the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. An average payout ratio lower than 65% signals that the company has retained a majority of its earnings for reinvestment in growth opportunities or to strengthen its balance sheet. For dividend investors, a lower payout ratio often suggests a sustainable dividend that can continue through various economic cycles. It also implies financial prudence on the company's part, avoiding over-distribution of profits. Littelfuse maintaining an average payout ratio of 15.19% over the last 20 years is a highly conservative measure, ensuring plenty of room for reinvestment and protection against future uncertainties. This trend is excellent for long-term growth and dividend stability.

Dividends Well Covered by Earnings?

Dividends covered by earnings refer to the ability of a company's earnings to pay out dividends. It's important as it indicates financial stability and sustainability.

Littelfuse has shown a consistent trend in covering dividends with earnings since 2010. It started from 0.042 in 2010 and peaked at around 0.359 in 2020, suggesting increased earnings relative to dividends. However, a dip to around 0.149 in 2022 and 2023 indicates a recent decrease in this coverage. While overall, it's a good trend with occasional dips, which need monitoring.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is a measure of how easily a company can pay dividends to its shareholders from its generated free cash flow. It indicates financial stability and sustainability of the dividend policy.

Littelfuse (LFUS) has demonstrated a consistent capability to cover its dividend payouts from its free cash flow over the years. Starting from 2008, the initial ratio was 3.98%, indicating a minimal portion of free cash flow was used to pay dividends. Over time, this percentage has generally increased, reaching approximately 16.75% in recent years. This trend signifies that although a larger portion of free cash flow is being used to pay dividends, it still represents a small fraction of overall free cash flow. The free cash flow has also shown a strong upward trajectory, rising from around $36 million in 2003 to over $371 million in 2023. This growth in free cash flow alongside manageable dividend payout ratios suggests good financial health and a sustainable dividend policy for Littelfuse.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments is critical for income-seeking investors as it ensures a predictable and reliable income stream.

Littelfuse (LFUS) experienced volatile dividends before 2010, evidenced by no dividends paid until 2010. However, from 2010 onwards, the company has consistently raised its dividend, moving from $0.15 per share in 2010 to $2.50 per share in 2023. Despite these increases, the company does appear to have reduced dividends by 20% or more in some years, hence showing inconsistency in dividend stability. This trend is concerning for long-term, income-focused investors seeking stability.

Dividends Paid for Over 25 Years?

Examining whether a company has paid consistent dividends over a long period is crucial. It indicates not just financial stability but also a commitment to returning value to shareholders.

Based on the data from 1998 to 2023, Littelfuse (LFUS) has not paid dividends for over 25 years. In fact, dividends only started being paid in 2011. Therefore, while the commitment to paying dividends has been growing positively since then, with an increase from $0.15 per share in 2010 to $2.5 per share in 2023, it does not meet the criterion of paying dividends for over a quarter of a century. This trend is good in terms of increasing dividends, but the company does not have a long-standing history of dividend payments which might put it at a disadvantage for this criterion.

Reliable Stock Repurchases Over the Past 20 Years?

stock buybacks

The trend of Littelfuse (LFUS) repurchasing shares over the past 20 years can be considered mixed overall. Out of the 21 analyzed years, the company conducted reliable repurchases in nine of those years. Repurchase years include 2005, 2006, 2007, 2008, 2009, 2012, 2015, 2019, and 2020. The average repurchase rate of 0.6408 indicates a relatively low level of buybacks. Buybacks can signal management's confidence in the company's future prospects or be used as a tool to improve financial ratios such as earnings per share (EPS). Generally, consistent buyback strategies can be seen as a positive sign by investors. In Littelfuse's case, a mixed record of buybacks might suggest either fluctuating confidence or the use of alternative capital allocation strategies such as acquisitions or investments. Therefore, the trend could be seen as neutral to slightly positive depending on interpretation.