Last update on 2024-06-27

Landstar System (LSTR) - Dividend Analysis (Final Score: 5/8)

Analysis of Landstar System's (LSTR) dividend policy using an 8-criteria scoring system. Stability and performance evaluated to inform income-seeking investors.

Short Analysis - Dividend Score: 5

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

The dividend analysis of Landstar System (LSTR) evaluates performance and stability based on 8 criteria and assigns a score of 5 out of 8. Key points: \n1. **Dividend Yield:** LSTR's yield of 1.6834% is below the industry average of 2.27%, with historical volatility. Though lower, stock price appreciation has been significant over 20 years. \n2. **Dividend Growth:** Average annual growth rate exceeds 5%, showing strong performance and value return to shareholders.\n3. **Payout Ratio:** Average of 17.18% over 20 years, well below the 65% threshold, indicating strong financial health and conservative management.\n4. **Earnings Coverage:** Generally well covered by earnings, despite some weaker years. Recent stability in covering dividends is positive. \n5. **Cash Flow Coverage:** Recent trends show dividends well covered by cash flow, indicating financial resilience.\n6. **Dividend Stability:** Generally stable, despite minor reductions in some years, maintaining investor confidence.\n7. **Dividend History:** Paid dividends since 2005, but less than 25 years, not meeting this criterion.\n8. **Stock Repurchases:** Reliable buyback program, reducing shares outstanding significantly over 20 years.

Insights for Value Investors Seeking Stable Income

While Landstar System (LSTR) doesn't meet all criteria, its overall performance is decent. It shows strong dividend growth, conservative payout ratios, stable dividend history, and reliable stock repurchases. The main drawback is a lower-than-industry-average yield. If you're a long-term investor seeking stability and growth rather than high immediate yield, LSTR might be worth considering.

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 measures the annual dividend payment relative to the stock price. It is important as it shows the immediate return on investment from dividends, significant for income-focused investors.

Landstar System (LSTR) has a dividend yield of 1.6834%, which is lower than the industry average of 2.27%. Historically, the company's dividend yield has been quite volatile, with large spikes in 2015 and 2018, when it reached over 2%. The recent yield indicates a trend towards lower payouts compared to the industry average. This could be seen as a negative sign for income-seeking investors, particularly those relying on dividends for steady income. However, the company's stock price has generally increased over the past 20 years, from $19.02 in 2003 to $193.65 in 2023, potentially mitigating concerns about lower yields since capital appreciation has been significant.

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

The Dividend Growth Rate measures how much a company’s dividend payments have increased over a given period. A rate higher than 5% is often seen as a good indicator of a company's financial health and its commitment to returning value to shareholders.

According to the provided Dividend Per Share Ratio data, the average dividend ratio over the past 20 years is 66.92%. Several individual years have significant fluctuations, for example, showing a 460.53% increase in 2018 and a significant decline in some other years. While there are extreme outliers, the overall average growth rate well exceeds 5%, indicating a generally strong performance in returning value to shareholders. This trend is considered very good for investors looking for robust and growing dividends.

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

Analyzing the average payout ratio over an extended period is crucial as it reflects a company’s ability to sustain and grow its dividend payments without compromising financial health. A payout ratio higher than 65% could indicate potential risk in maintaining dividend payouts, especially during economic downturns.

Landstar System (LSTR) has consistently maintained an average payout ratio of approximately 17.18% over the past 20 years. This figure is significantly lower than the 65% threshold, which is a positive indicator. A lower payout ratio suggests that LSTR has been effectively balancing its profits between rewarding shareholders and reinvesting back into the company. This conservative approach reduces the risk of financial strain during economic hardships, allowing for more consistent and potentially growing dividend payments over the long term. It's a robust sign of disciplined financial management and suggests stability in LSTR's dividend-paying capacity.

Dividends Well Covered by Earnings?

Dividends should generally be well supported by a company's earnings as this indicates the dividend's sustainability. If earnings are consistently higher than dividends, the company is likely in a good position to continue paying and possibly even increasing dividends.

Analyzing the data for Landstar System (LSTR) from 2003 to 2023, it is evident that dividends per share have generally been well covered by earnings per share. For instance, during peak years such as 2018, the earnings per share was $6.18 while dividends per share were $2.13, indicating a strong coverage ratio of 34.47%. Similarly, in 2021 and 2022, despite high dividends of $2.92 and $3.10, the earnings per share were substantially higher at $9.98 and $11.76, yielding robust coverage ratios of 29.26% and 26.35% respectively. However, certain years like 2009, 2010, 2011, and 2016 experienced lower coverage ratios below 13%, though not critically alarming, investors should still be cautious. Nonetheless, the overall trend has been positive with more recent years showcasing improved stability in covering dividends through earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow are crucial because they signify that a company generates enough cash to sustain its dividend payments. This reflects financial health and the potential for future dividend growth.

Over the years, Landstar System (NASDAQ: LSTR) has varied in its ability to cover its dividends with free cash flow. While early years saw minimal coverage, recent years reflect a healthier trend. In 2023, the dividend coverage ratio stood at approximately 0.32, indicating that free cash flow sufficiently covers the dividends, despite significant variability. The peaks in coverage around 2014, 2019, and 2020 show strong financial health and commitment to return capital to shareholders. A consistent increase in free cash flow that outpaces dividend growth is crucial for sustainable dividends, and Landstar has shown resilience in its operational cash flow to cover shareholder returns effectively.

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.

A review of the dividend per share for Landstar System (LSTR) over the past 20 years shows an overall positive trend. Significant increases in dividends are observed in several years, while there were minor reductions, including a notable decrease in 2009 and 2013. However, despite some fluctuations, no single year's dividend dropped by more than 20%. This indicates a stable and generally increasing dividend policy, fostering confidence among income-focused investors. Stability in dividends is crucial because it ensures a reliable income stream for investors who depend on dividend income, whether they are retirees or those seeking predictable returns. As there hasn't been a substantial drop in dividends, it affirms LSTR's consistent financial health and management's commitment to rewarding shareholders.

Dividends Paid for Over 25 Years?

The consistency of dividend payouts over a long period, such as 25 years, demonstrates a company's commitment to returning value to shareholders. This is indicative of a stable and secure financial position.

Landstar System (LSTR) has started paying dividends since 2005, indicating it has been returning value to its shareholders for less than 25 years. The trend shows an initial ramping up period with sporadic increments which stabilize and then increase progressively over time. In recent years, we observe steep increases to $2.13 in 2018, $2.79 in 2020, and $3.26 in 2022. While the company hasn’t achieved the 25-year dividend payout mark, the trend of increasing dividends is positive, showcasing the company’s solid financial performance and increasing commitment to shareholders. However, since it hasn't paid dividends for over 25 years, this criterion is unmet.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are important as they indicate a company's commitment to returning value to shareholders. Consistent buybacks can signal management's confidence in the company's future earnings and financial health.

Landstar System (LSTR) has demonstrated a reliable stock repurchase program over the past 20 years, with shares outstanding decreasing from 63,840,000 in 2003 to 35,920,000 in 2023. This reduction reflects an average annual repurchase rate of approximately -2.8249%. This long-term trend is favorable as it suggests that the company has been steadily buying back its shares, thereby increasing the ownership stake of remaining shareholders and possibly boosting the stock price. Additionally, it signals confidence in the company's financial stability and future prospects.