Last update on 2024-06-27

Marriott (MAR) - Dividend Analysis (Final Score: 6/8)

Analyzing Marriott's dividend policy using an 8-criteria scoring system reveals a stable and potentially lucrative investment for income-focused investors.

Short Analysis - Dividend Score: 6

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

Marriott has had a mixed track record in their dividend policy over the last 20 years. They’ve scored 6 out of 8 in the given criteria which is considered above average. Their dividend yield is currently higher than the industry average which is good for income-focused investors. The average annual payout ratio is low (20.34%), indicating a conservative and sustainable approach to dividends. However, dividends have shown instability over time with notable drops during the 2008 financial crisis and completely stopping in 2020 due to COVID-19. Though they didn’t manage continuous payouts for 25 years, the rebound in dividends in recent years displays resilience. Marriott’s dividends are well-covered by earnings and cash flow in recent years, indicating a firm position. However, historical fluctuations and halts point to potential instability in an economic downturn. Finally, the company also displayed a good trend in share repurchases, showing their intent to return value to shareholders.

Insights for Value Investors Seeking Stable Income

Given that Marriott has shown resilience and a strong ability to rebound, it might be worth considering for investment, especially for those looking for strong, long-term dividend potential. However, investors must be aware of its historical fluctuations and the possibility of future instability during economic downturns. It might be best suited for investors who are willing to accept some risk in exchange for potentially high returns in the long run.

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 a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. It represents the return on investment from dividends alone and is an important metric for income-focused investors.

Marriott's (MAR) current dividend yield is 0.8691%, which is higher than the industry average of 0.78%. Looking at historical data, Marriott's dividend yield has shown considerable variability, ranging from a low of 0% in 2021 to as high as 1.7429% in 2008. The yield often fluctuates due to changes in dividend payments and stock price movements. Compacting Marriott's average dividend yield over the past 20 years reveals that despite these fluctuations, Marriott has frequently had periods of higher yields compared to the broader industry. With the latest figure being higher than the industry average, it is a positive sign for income-focused investors. The data also showed that Marriott suspended its dividends in 2020, likely due to the COVID-19 pandemic, but has since reinstated them. The 2023 yield aligns closely with long-term historical averages, suggesting stability in its dividend policy. This trend is supportive for investors seeking consistent income from their investments.

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

Why is the Dividend Growth Rate important to consider?

The dividend growth rate is crucial because it indicates a company's ability to increase its dividend payments over time, providing higher income to shareholders and signaling financial health and stability.

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

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

Analyzing the data provided, the average payout ratio for Marriott (MAR) over the past 20 years is approximately 20.34%. This is well below the threshold of 65%, indicating a conservative and sustainable dividend policy. Most years show a payout ratio significantly under 50%, except a few years around the global financial crisis in 2008 and the COVID-19 pandemic in 2020 where anomalies are visible (including years with negative ratios and one year with 0%). This trend demonstrates good financial health and prudence, showing Marriott's commitment to maintaining a reliable dividend payout irrespective of economic turmoil.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Assessing whether dividends are well covered by earnings is a vital part of dividend analysis since it reflects the company's ability to continue paying dividends without compromising its financial health. A company whose earnings sufficiently cover its dividends is less likely to reduce its payout, promoting investor confidence. This ratio also helps gauge the sustainability and safety of the dividend. Ideally, dividends should be well within earnings to provide a buffer for unexpected downturns and sustain long-term payouts.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow refers to the company's ability to pay its dividends from the cash it generates through its operations. It is important because it shows how sustainable the dividend payments are without resorting to debt or cash reserves.

From the given data, Marriott's (MAR) dividends were covered by its free cash flow with some noticeable fluctuations over the years. In 2005 and 2007, the dividend payout ratio significantly exceeded the free cash flow, indicating potential unsustainability during those periods. In contrast, the recent trend, particularly from 2015 to 2023, shows more stability. Specifically, the dividend coverage ratio in 2023 was approximately 2.16 (where a ratio above 1 indicates that free cash flow well covers the dividend), showing a very healthy financial status. This trend suggests improving cash flow generation and better financial health overall, signaling an improvement in the company's ability to sustain and possibly increase dividend payments in the future. However, the extreme values in certain years (2005: 1.47, 2009: 0.092, etc.) are critical to consider and investigate further.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are key for income investors because they indicate a company's ability to generate consistent cash flow and manage its earnings effectively, contributing to investment predictability and financial security.

Upon examining the dividend per share for Marriott (MAR) over the last 20 years, there have been notable fluctuations. The values went from $0.1375 in 2003 to higher peaks and eventually reached $1.96 in 2023. However, there were substantial drops, particularly during the global financial crisis in 2008-2009, where dividends dropped to $0.082 in 2009 and in recent years, highlighting a major dip to $0 in 2020, likely due to the COVID-19 pandemic. These significant declines of more than 20%, especially the complete halting of dividends in 2020, point to periods of instability. This trend is generally negative for income-seeking investors who prioritize dividend stability, considering Marriott's dividend payments were not stable and experienced crucial declines.

Dividends Paid for Over 25 Years?

The criterion examines whether Marriott (MAR) has consistently paid dividends for over 25 years, signaling financial health and a commitment to returning value to shareholders.

Marriott has generally shown a steady increase in dividends per share from 1998 to 2019, with amounts growing from $0.0909 to $1.85 in 2019. However, the dividend payment was significantly reduced in 2010 to $0.082 and there was a complete suspension of dividends in 2020—a year marked by the global COVID-19 pandemic. In 2021, dividends remained at $0 before bouncing back to $1.00 in 2022, and reaching $1.96 in 2023. The long-term trend before the pandemic showcases a robust commitment to dividends. The temporary suspension in 2020 was likely a strategic move to maintain liquidity during unprecedented times. This indicates prudent financial management amidst crisis, but it also reflects that Marriott did not fulfill the criterion of continuous dividend payments for 25 years without interruption. Despite this, the swift recovery in 2022 and 2023 displays the resilience and strong recovery of the company’s financial health. Thus, while not perfect, this trend is relatively good, albeit with room for improvement particularly in maintaining unbroken streaks in extraordinary circumstances.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

By evaluating Marriott's trend in share repurchase over a span of 20 years, it's possible to ascertain the company's commitment to returning value to shareholders internally. Consistent share repurchases can indicate strong cash flow and management confidence in the company's future. Additionally, reducing the number of outstanding shares can lead to an increase in earnings per share, benefiting long-term investors.