Last update on 2024-06-27

Masco (MAS) - Dividend Analysis (Final Score: 6/8)

Explore Masco (MAS) dividend performance and stability with a 6/8 score using an 8-criteria scoring system. Comprehensive analysis on payout, yield, growth, and coverage.

Short Analysis - Dividend Score: 6

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

Alright, we looked at Masco (MAS) and how it handles its dividends using an 8-criteria scoring system. Here's the gist: Masco scored a 6 out of 8, which is pretty decent. Their current dividend yield is lower than the industry average, which might be a bummer for those relying on income, but it may mean their stock is stronger. The annual dividend growth has been above 5%, but it's been kind of like a rollercoaster with big ups and downs. Masco’s payout ratio is way lower than the 65% benchmark, meaning they're good at keeping dividends sustainable. Their earnings are enough to cover dividends, although they had some bad years in the past. Cash flow is good; they usually generate enough to cover dividends. Dividends have only dropped significantly once in 2009, but they've been growing steadily since. For over 25 years, they've been paying dividends, which shows they're stable. Finally, they do stock buybacks which can be a good sign that they believe their stock value will go up.

Insights for Value Investors Seeking Stable Income

Masco seems pretty solid if you’re looking for stability and long-term growth rather than just high immediate income. They've had a consistent dividend history for over 25 years even though they've had some ups and downs. Their low payout ratio and good cash flow coverage mean that they're likely to keep paying and possibly increase dividends. Plus, stock buybacks show management believes in their future. So, if you're an investor looking for a stable, long-term play, Masco is worth considering. Just keep in mind the lower yield if immediate high income is what you’re after.

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 return an investor is getting from a company's dividend payments compared to its stock price. It is calculated as the annual dividends per share divided by the stock price per share.

Masco (MAS) currently has a dividend yield of 1.702%, which is significantly lower than the industry average of 5.78%. This discrepancy could suggest that Masco is either undervaluing its dividends or has a stock price that has grown more robustly than its peers. Historically, Masco's dividend yield has seen considerable fluctuations, peaking at 8.3109% in 2008 during the financial crisis when many companies faced reduced stock prices, thereby inflating yields. Subsequently, the yield dropped substantially and has ranged largely between 1% to 3% over the past decade. It was exceptionally low at 0.9217% in 2017 but showed improvement over the past five years reaching 1.702% in 2023. The declining trend could be a red flag for dividend-focused investors, but it might also indicate relative stock price strength, as observed by closing prices escalating from $24.0861 in 2003 to $66.98 in 2023. Overall, compared to industry standards, Masco's lower dividend yield might appear unfavorable, particularly to income-seeking investors.

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

The Dividend Growth Rate assesses the annualized percentage rate of growth of a company's dividend payments over a specified time. A growth rate exceeding 5% signifies strong and sustainable dividend payment expansion.

Upon examining Masco's (MAS) dividend-per-share ratio from 2003 to 2023, the growth pattern of dividend payments reveals considerable volatility. While there are years of exceptional growth such as the 55.0459% in 2021, these periods are interspersed with years of negative growth rates, most notably -50.2688% in 2009 and other instances of zero dividends from 2010-2012. Assessing the entire span of 20 years, the average dividend ratio stands at 6.5462%. This implies that, on average, the company has managed to grow its dividends at a rate slightly above the benchmark of 5%. Despite this assertion, the pronounced volatility represents a potential risk factor. Hence, although the trend meets the 5% criterion, note the erratic yearly fluctuations, which could influence long-term dividend reliability.

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

This criterion examines whether the average payout ratio, which compares dividends paid to net earnings, stays below 65% over the last 20 years. A lower payout ratio often indicates greater financial stability and room for dividend growth.

Masco (MAS) has demonstrated a highly conservative dividend payout strategy with an average payout ratio of just 12.33% over the last 20 years, which is significantly lower than the threshold of 65%. Although this includes some highly negative payout ratios during downturn years (e.g., -80.72% in 2012), the overall trend indicates robust earnings and conservative dividend payments. Considering factors like the erratic payout ratios during certain years, reflecting periods of financial strain or strategic readjustments, the generally low payout ratio is very positive. It indicates a strong capacity for dividend sustainability and growth.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This criterion evaluates the company's ability to pay dividends from its net income, ensuring that the payout is not putting strain on the company's finances. A healthy payout ratio generally indicates a sustainable dividend policy.

Masco's EPS shows highly fluctuating trends from 2003 to 2023, ranging from -$2.9885 during 2010 to $4.6364 in 2020. The significant negative EPS years (2008-2011) align with the financial crisis period, showing substantial strain on Masco's earnings. However, the company has since rebounded, showing positive earnings and growth in EPS from 2012 onwards, peaking in 2020 at $4.6364. Conversely, the dividend per share reflects lower volatility and a conservative approach in payouts, especially in the latter years. Despite low payout ratios during some negative EPS years, Masco seems to be cautiously managing dividend growth (from $0.2636 in 2011 to $1.14 in 2023), maintaining financially prudent distributions. The 5-year average payout ratio is approximately 28%, suggesting a conservative and sustainable dividend policy. Therefore, the trend is relatively good now but has seen turbulent phases.

Dividends Well Covered by Cash Flow?

This criterion evaluates if Masco (MAS) generates enough free cash flow to cover its dividend payouts. This indicates the sustainability of its dividends and its ability to continue rewarding shareholders even in challenging economic periods. A cash flow coverage ratio of less than 1 suggests the dividends are not fully covered, while a ratio significantly above 1 indicates strong coverage.

Analyzing the data, Masco (MAS) has shown a strong capacity to cover its dividends with free cash flow in the majority of the years. For instance, in the year 2023, the company's free cash flow was $1.17 billion, while dividend payouts were $257 million, resulting in a dividend coverage ratio of approximately 0.22. This indicates a very healthy coverage, as Masco generates considerably more cash than it distributes in dividends. However, there were years like 2011 where the ratio was as high as 1.42, highlighting some inconsistency. Nonetheless, the overall trend indicates that the company's cash flow generally well supports its dividend payments, which is favorable for long-term dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividend payments are critical for income-seeking investors who rely on consistent income, with no drops of more than 20% over the past 20 years preferred.

Examining Masco's (MAS) dividend history reveals that from 2003 to 2023, there was only one significant drop. In 2009 during the financial crisis, Masco reduced its dividend from $0.8128 to $0.4042 (approx. 50% reduction). However, this has been the only major downturn, and the firm has demonstrated resilience by progressively increasing dividends since then. Except for this notable drop, Masco has maintained stable and growing dividends with a promising upward trend post-recession, hitting $1.14 in 2023. The current trend is positive for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years evaluates a company's ability to consistently deliver cash returns to its shareholders. It signifies financial stability and shareholder commitment.

Over the last 25 years, Masco (MAS) has demonstrated its consistency in paying dividends, with amounts ranging from $0.3779 per share in 1998 to $1.14 per share in 2023. Despite some fluctuations, including a notable dip in 2009 following the financial crisis, the company resumed its upward trend in dividends. This consistent history signifies Masco's solid financial health and ongoing commitment to rewarding its shareholders. The trend is positively indicative of Masco's ability to generate sufficient earnings and maintain stable cash flows.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Masco (MAS) and why it is important to consider

Stock repurchases or buybacks refer to the company buying back its own shares from the existing shareholders. This criterion is important for several reasons. Firstly, it reduces the number of outstanding shares, which can increase the earnings per share (EPS), a critical financial metric. Secondly, it demonstrates that the company has enough cash reserves and believes its shares to be undervalued. Therefore, consistent buybacks can be an indicator of a company's financial health and management's confidence in its future prospects.