Last update on 2024-06-27

Logitech (LOGI) - Dividend Analysis (Final Score: 5/8)

Analyze the performance and stability of Logitech (LOGI)'s dividend policy, scoring 5/8 on our 8-criteria system. Learn more about its sustainability.

Short Analysis - Dividend Score: 5

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

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 is the annual dividend payment divided by the stock price. It reflects the return on investment for holding the stock solely for its dividend. A higher yield indicates a better return to investors, but this needs to be compared to industry standards.

Logitech's current dividend yield of 1.2308% is significantly lower than the industry average of 8.48%. Over the past 20 years, Logitech's dividend yield has varied extensively, spiking at 11.2334% in 2012 and generally remaining below the industry average in most years. A low dividend yield might suggest that the company is retaining more earnings for growth or it could be unattractive for investors seeking income. Additionally, Logitech's stock price has seen significant growth, closing at $95.06 in 2023 compared to $10.63 in 2003, which inversely affects the percentage yield. Logitech’s payment of dividends also started relatively recently compared to some peers, beginning substantial payouts only in the early 2010s. This trend might be more attractive for growth-oriented investors rather than those focused on current income.

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

The dividend growth rate is an essential measure for assessing the health and sustainability of a company's dividend policy. It indicates how much the dividend payout has grown over time, which can be a sign of financial stability and profitability.

The given data indicates significant fluctuations in Logitech's dividend per share ratio. Key points include a peak at 133.3333% in 2014 and a low of -75.2066% in 2013. With an average dividend ratio of approximately 9.61% over the last 20 years, the overall growth rate surpasses the 5% benchmark. This historical trend suggests a positive outlook regarding the company's ability to grow its dividends, despite the variability in year-over-year figures. However, investors should consider the drastic changes from year to year, as this volatility could be seen as a risk. Nevertheless, the general growth trend is beneficial.

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

The payout ratio indicates what percentage of a company’s earnings are being paid to shareholders in the form of dividends. A payout ratio below 65% over the last 20 years suggests that the company is retaining a significant portion of its earnings to reinvest in the business, which can be a sign of financial health and sustainability.

The data reveals an average payout ratio of 42.35% over the past 20 years, comfortably below the 65% threshold. Some outliers such as the one in 2011 with 208.11%, 2013 with -14.59%, and 2015 with 107.17% appear to be exceptions possibly due to extraordinary circumstances in those years. The recent trend shows a more sustainable and moderate payout ratio especially from 2016 to 2023, with the post-2020 period reflecting payouts consistently under 60%. This overall trend is favorable, indicating that the company has maintained a prudent approach in balancing shareholder returns with necessary reinvestments into the business.

Dividends Well Covered by Earnings?

Dividends being covered by earnings is crucial because it indicates that the company generates enough profit to sustain and potentially increase dividend payouts without compromising its financial health.

Analyzing Logitech's earnings per share (EPS) and dividend per share (DPS) data from 2003 to 2023, it is evident that the trend of dividends being covered by earnings has been inconsistent. For example, in 2009 and prior years, the company did not pay dividends, hence no coverage ratio was available. Starting from 2012 when dividends were introduced, the EPS coverage shows drastic variations. For 2012, the EPS to DPS ratio was 2.08, indicating that earnings more than adequately covered dividends. However, in 2013, a -0.15 ratio was observed due to a negative EPS, suggesting dividends were not covered by earnings. Generally, though, the data from 2015 to 2018 shows good coverage, with ratios above 0.5, suggesting stable financial health. Conversely, the declining ratios from 2019 onwards, particularly 2021 through 2022 being at 0.16, raise concerns about sustainability. The ratio in 2023 improving to 0.52 is a positive signal, yet it's critical to observe if this trend continues. So, while the company did manage to cover dividends in most years, recent declining trends signal that it may face challenges if this pattern continues.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Looking at Logitech's free cash flow over the years, we see a general upward trend, peaking at $1.38 billion in 2021. However, the cash flow sharply declined to $209 million in 2022 before recovering to $442 million in 2023. Simultaneously, the dividend payout amount has seen a relatively stable upward trend from $133 million in 2013 to $158 million in 2023. This indicates that dividends are consistently being increased, likely to maintain shareholder satisfaction. The essential metric here is the 'Dividend covered by Cashflow' ratio. A ratio above 1 indicates a company is generating enough free cash flow to cover its dividends entirely. For Logitech, the ratio has dropped notably in recent years, dipping to 0.106 in 2021, suggesting that the dividend payments far exceeded free cash flow. This poses potential risks. However, in 2022 and 2023, the ratio saw a bounce-back to 0.762 and 0.359 respectively, although still below 1. This implies the company is still struggling to cover its dividend payouts fully with free cash flow, signifying potential red flags for dividend sustainability if the free cash flow does not stabilize. Optimally, investors should look for dividend coverage well over 1 to ensure safety.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Reviewing the dividend per share data for Logitech (LOGI) over the past two decades reveals a particularly illustrative trend. Starting in 2010 with a dividend of 0.847, the dividends appear to go through some fluctuations. For instance, in 2010 the dividend per share stood at 0.847, then it decreased significantly to 0.21 in 2011, but there was no year-on-year drop by 20% after dividends became regular in 2012. Post-2012, the dividends exhibit an upward trajectory with occasional decreases. For example, there is a drop between some years, such as from 1.041 in 2015 to 0.574 in 2016. Income-seeking investors would find this trend moderately concerning prior to 2012 because of irregular payments and initial significant decrease, but reassuring afterward. From 2012 onwards, there has been no year where the dividend fell by more than 20%. The dividends have always either increased or remained relatively stable with minor fluctuations—always recovering in subsequent years. The consistency demonstrated by the increasing dividends from 2012 and onwards, reaching 1.17 in 2023, signifies a positive outlook. Therefore, the absence of a greater-than-20% drop in recent years is a good signal for investors focusing on stable and growing dividends.

Dividends Paid for Over 25 Years?

Explain the criterion for Logitech (LOGI) and why it is important to consider

Dividends Paid for Over 25 Years (1998-2023), Why considering long-term dividend payment history matters, your assessment.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company’s commitment to returning value to shareholders and can signal confidence in its own business prospects. It is especially comforting for investors to see a consistent buyback policy.

Logitech has engaged in share repurchases across multiple years over the last two decades, albeit not continuously. Although the company repurchased shares in around 14 of the past 20 years, some anomalies exist such as an increase in shares in 2014, 2015, 2016, 2018, and 2021, which might be due to compensatory stock issuances along with repurchases. Specifically, the stock buyback years include standout years like 2004, 2005, and 2017 where meaningful reductions in outstanding shares are seen. The average repurchase rate of -1.1409 indicates a moderately shrinking share float, which is generally positive as it can enhance per-share metrics like earnings. From a value perspective, this record displays a generally favorable trend though not strictly linear in the last two decades. Investors often appreciate continuous, significant buybacks as this positively impacts shareholder value by effectively deploying surplus capital. Thus, despite the sporadic nature of the buybacks, one can reasonably surmise a good trend in nourishing shareholder value.