Last update on 2024-06-27

Linc (LNC) - Dividend Analysis (Final Score: 4/8)

Analyze the performance and stability of Linc (LNC) dividends with our 8-criteria scoring system. Final dividend score: 4/8, indicating mixed but strong potential.

Short Analysis - Dividend Score: 4

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

Linc (LNC) was assessed using an 8-criteria system to evaluate the performance and stability of its dividend policy. Here's the breakdown: 1. **Dividend Yield**: LNC's 6.6741% yield is much higher than the industry average of 1.09%, making it attractive but also displaying volatility. 2. **Dividend Growth Rate**: LNC has not maintained a consistent 5% growth rate over the past 20 years, showing instability and frequent halts in dividends. 3. **Average Payout Ratio**: The average payout ratio stands at 6.78%, well below the ideal 65%, indicating potential reinvestment and financial prudence. 4. **Dividends Covered by Earnings**: Not explicitly detailed. Essential for understanding dividend sustainability. 5. **Dividends Covered by Cash Flow**: Indicated inconsistency, with some years of negative coverage and others of positive trends. 6. **Stable Dividends Since Inception**: The dividend history showed drops of more than 20% and some years of non-payment, signaling unreliability. 7. **Dividends Paid for Over 25 Years**: LNC does not meet this criterion due to several years of non-payment. 8. **Consistent Stock Repurchases**: Showed volatility with fluctuating stock counts, indicating irregular buybacks. Overall, while LNC offers high yields and a conservative payout ratio, the inconsistencies in dividend payments and growth raise concerns.

Insights for Value Investors Seeking Stable Income

Given the mixed results, LNC's dividend policy seems volatile and may not be the best fit for conservative, income-focused investors who seek stable and growing dividend income. It might be worth investigating further for those with a higher risk tolerance looking for high-yield opportunities.

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 reflects the dividend income an investor can expect relative to the price of the stock.

A dividend yield of 6.6741% for Linc (LNC) is considerably higher than the industry average of 1.09%. Historically, Linc's dividend yield has shown significant fluctuations, with peaks such as 8.811% in 2008 and 6.9569% in 2020. The latest yield of 6.6741% indicates strong dividend payments and could be attractive for income-focused investors. However, the fluctuations and occasional zeros indicate periods of non-payment, implying volatility. Compared to a generally stable industry average, this trend is a mixed signal but currently favorable due to the high yield.

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

The Dividend Growth Rate criterion evaluates the annual percentage increase in a company's dividend payout. It is crucial because a consistent high growth rate indicates financial health and shareholder value.

Based on the given data, Linc (LNC) does not meet the criterion of having a consistent Dividend Growth Rate higher than 5% over the last 20 years. The observed Dividend Per Share Ratio is highly volatile, with significant fluctuations ranging from -100% to 133.33%. Notably, there are even years where dividends were not paid at all. The average Dividend Ratio over this period is -6.87%, which underscores that there have been more reductions or eliminations in dividends than increments. This negative trend is concerning and indicates instability in the company's ability to sustain or grow its dividends. For dividend-focused investors, this pattern is unfavorable and points toward potential underlying financial issues or inconsistent earnings.

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

The payout ratio is the proportion of earnings a company pays to its shareholders in the form of dividends. For financial stability and sustainable growth, an average payout ratio lower than 65% is considered ideal.

Evaluating Lincoln National Corporation (LNC) over the past 20 years, we notice that the average payout ratio stands at 6.78%, which is significantly below the cutoff threshold of 65%. This remarkably low payout ratio indicates that LNC has retained a considerable portion of its earnings for reinvestment or other financial maneuvers. Such a conservative payout strategy can be perceived as a positive indicator of the company’s potential for growth and flexibility to withstand financial adversities. However, the occasionally negative and extremely low payout figures in specific years warrant a closer look to understand their implications comprehensively.

Dividends Well Covered by Earnings?

Explain the criterion for Linc (LNC) and why it is important to consider

Earnings per share (EPS) reflects the company's profitability on a per-share basis, indicating how much money each shareholder would receive if the company's profits were distributed. If a company's EPS is sufficiently high relative to its dividends per share (DPS), it suggests that the company can comfortably pay its dividends from its earnings, which is crucial for assessing dividend sustainability.

Dividends Well Covered by Cash Flow?

Why is it important for dividends to be well covered by cash flow?

Dividends Well Covered by Cash Flow is a crucial metric because it ensures that a company can sustain its dividend payouts without compromising operational cash. For Lincoln Financial Group (LNC), the trend of Free Cashflow and Dividend Payout compared from 2003 to 2023 reveals periods of both coverage and undercoverage. Notably, during 2019 and the pandemic years of 2020 and 2021, the ratios generally detach from a positive trend, indicating inconsistent patterns: In 2019, a significant negative spike is observed with Free Cashflow at -$2.686 billion and Dividend Payouts soaring to $303 million leading to a -11.28% coverage. Following years show a gradual improvement though with 2021 as a recovery indicator boasting a Free Cashflow of $3.609 billion but still with constrained performance at a coverage of 8.59%. This inconsistency suggests financial vulnerability towards its dividend policy, affecting investor sentiment negatively. Encouragingly, there are also remarkable positive balances, e.g., in 2014 with a cashflow to payout ratio of 158.59%. Thus, maintaining robust patterns of retaining positive cashflow and disciplined dividend increases can adept LNC to better navigate financial fluctuations and strengthen dividend reliability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years and its importance.

A stable dividend history signifies reliability and the company's commitment to shareholders. For Linc (LNC), a drop of more than 20% between consecutive years does occur. For example, dividends dropped drastically, even to zero, during 2008-2009 and experienced a few inconsistencies thereafter. While the long-term trend shows some recovery and growth by 2023, the irregularities pose a risk for income investors depending heavily on consistent dividends.

Dividends Paid for Over 25 Years?

Assessing if a company has consistently paid dividends over a long period is critical for evaluating its reliability and financial health.

Linc (LNC) does not meet the criterion of having paid dividends consistently for over 25 years. While the company did issue dividends frequently in the earlier years, it shows significant inconsistencies, particularly from 2008 onwards. Dividend payments were missing in several years (e.g., 2008, 2010, 2012, and 2014) and fluctuated dramatically in others. In terms of evaluating the company's dividend reliability, this trend is concerning and may raise questions about its financial stability and commitment to shareholder returns.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

The analysis of LNC's shares over the past 20 years reveals a fairly volatile pattern, with many spikes in share counts during specific years. For instance, significant decreases in shares outstanding occurred in years like 2008, where the count dropped drastically, potentially pointing towards repurchase activities. The patterns suggest that LNC's stock repurchase activities are not uniformly paced or regularly timed. On several occasions, the number of shares showed dramatic reductions followed by sharp reincreases. Nevertheless, average repurchase activities over these years amounted to 330.4625, indicating some level of commitment towards returning capital to shareholders even if not managed with clear regularity. While LNC has shown some reliability in repurchasing shares during specific years, the erratic nature and lack of consistent pattern might not fully satisfy long-term stability aspirations.