Last update on 2024-06-27

Mercedes-Benz Group (MBG.DE) - Dividend Analysis (Final Score: 5/8)

Comprehensive dividend analysis of Mercedes-Benz Group (MBG.DE) using an 8-criteria scoring system. Get insights on performance, stability, and long-term returns.

Short Analysis - Dividend Score: 5

We're running Mercedes-Benz Group (MBG.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Mercedes-Benz Group's dividend policy has shown significant variability over the last 20 years. With an overall dividend score of 5 out of 8, the company's current high dividend yield of 8.3133% is attractive versus the industry average of 2.91%, but historical fluctuations and cuts raise caution. The average dividend growth rate of 8.67% and payout ratio of 58.95% indicate a fairly healthy and sustainable policy. Dividends have generally been well covered by earnings and cash flow, but there have been periods of underperformance. Dividend stability has been compromised at times, though the company has a long-term record of paying dividends for most of the past 25 years. Stock repurchases have been infrequent and not a significant strategy for the company.

Insights for Value Investors Seeking Stable Income

If you are an investor seeking high yield and can tolerate some historical volatility, Mercedes-Benz Group may be worth considering. The company is showing a strategic focus on returning income to shareholders with recent improvements in dividend payouts. However, it's essential to remain cautious and continue monitoring their financial health and payout sustainability. For those preferring highly stable and consistent dividend policies, exploring other options might be advisable.

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 shows how much a company pays out in dividends each year relative to its stock price. It is particularly important for income-focused investors who seek steady cash flows.

Mercedes-Benz Group's (MBG.DE) current dividend yield of 8.3133%, which is significantly higher than the industry average of 2.91%, signals a high payout ratio from the company. Historically, the company's dividend yield has been variable, often influenced by economic cycles and company performance. For example, during the 2008 financial crisis, the dividend yield sharply increased because of the declining stock price but not a commensurate fall in dividends. Notably, the dividend was entirely eliminated in 2010 and significantly lower in the early 2020s around the COVID-19 pandemic period. However, the yield spike in 2022 and 2023 demonstrates the company's current strategic focus on returning more income to shareholders. In contrast, the industry's average yield has remained relatively low and stable, making Mercedes-Benz's current yield particularly attractive. Therefore, this high yield could be a good indicator for income investors, conditioned on the company's ability to maintain or grow its dividend payouts while ensuring financial stability. However, investors should approach with a level of caution given the historical volatility in yield and occasional dividend cuts.

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

The Dividend Growth Rate criterion measures the annualized percentage increase in dividends paid to shareholders over a specific period, typically highlighting the trend in shareholder returns.

Analysing the provided Dividend Per Share Ratio for Mercedes-Benz Group (MBG.DE) from 2003 to 2023 indicates considerable volatility. Over the last 20 years, some years lacked dividends altogether, with significant declines in 2008 and 2009 (-70%, -100% respectively), suggesting economic pressures. The most notable positive jump was in 2022 (270.37%). The average dividend growth rate over this 20-year span stands at 8.67%, surpassing the 5% threshold considered healthy. This trend is favourable, indicating general stability and growth in shareholder returns, despite interspersed challenging years. Continued monitoring is advised to ensure sustained positive growth.

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

The payout ratio is an important financial metric representing the proportion of earnings a company pays to its shareholders as dividends, expressed as a percentage. A ratio below 65% is generally considered healthy, indicating that a company retains enough earnings to reinvest in the business while providing income to shareholders.

Mercedes-Benz Group's average payout ratio over the past 20 years is 58.95%, which is below the 65% threshold, indicating a generally healthy and sustainable dividend policy. Notably, there are significant outliers, such as the extremely high payout ratio in 2003 (340.44%) and negative payout in 2009 (-22.81%). The high ratio in 2003 could reflect a unique event where the company chose to distribute more earnings. The negative ratio in 2009 suggests a year of losses or strategic retention of earnings. Excluding such anomalies, the company's payout ratio consistently hovers around a reasonable figure, which suggests prudent earning management and alignment with shareholder interests.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Analyzing whether dividends are well covered by earnings per share (EPS) is crucial for assessing the sustainability of a company's dividend payouts. Mercedes-Benz Group has shown variability in how well dividends are covered by earnings. Historically, the ideal ratio is seen when EPS sufficiently surpasses the dividend per share, providing a cushion or margin of safety for shareholders. For Mercedes-Benz Group, years such as 2009, where there are negative EPS, indicate potential operational and profitability issues. Modern years like 2021 and 2022 see better coverage ratios, but a notable dip in 2023 signals a warning sign. On average, the ratios such as 0.62 and lower suggest thinner safety margins. Significant variability implies potential volatility in dividend reliability. Hence, while recent trends show improvement, concerns remain due to historical fluctuations.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow analyzes the sustainability of dividend payments by comparing the dividend payout to free cash flow, ensuring dividends are financed from cash generated by the business.

Between 2003 and 2023, Mercedes-Benz Group showcases fluctuations in its dividend coverage by free cash flow. Chronic under-coverage was evident in earlier years, peaking at -645.85% in 2013, implying dividends far exceeded free cash flow. Recent years, conversely, reflect healthier trends with 53.5% coverage in 2022 and 88.80% in 2023. This indicates improved operating cash flow management, although volatility suggests possible inconsistency in sustainability. The overall good trend in the latter years enhances shareholder confidence, demonstrating strategic improvements. However, continuous enhancement in cash flow stability is required to maintain this positive trend.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years signal financial robustness and reliability to shareholders. Consistency ensures trust and steady income.

Over the period from 2003 to 2023, Mercedes-Benz Group’s dividend per share demonstrated significant variability. While dividends started at €1.5 from 2003 to 2007, there was a substantial drop to zero in 2009, reaching a low point again in 2020 at €1.35 from €3.25 in 2019. Despite some sharp declines, there were also notable recoveries and increments, notably reaching €5.2 in 2023. However, the occurrence of complete dividend cuts and dramatic fluctuations undermine this stability criterion, rendering the trend as generally negative for income-seeking investors.

Dividends Paid for Over 25 Years?

Examining if a company has consistently paid dividends for over 25 years helps investors gauge the reliability and long-term financial health of the company.

Mercedes-Benz Group (MBG.DE) has paid dividends for most of the past 25 years, demonstrating a strong commitment to returning value to its shareholders. However, there were years such as 1998, 2010, and indeed the tumultuous period of 2009 where dividends were either drastically reduced or omitted altogether. Despite these fluctuations, the overall upward trend in dividends, even achieving EUR 5.2 per share in 2023, signifies resilience and financial growth. This is a positive signal for investors seeking long-term stable returns.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years?

Analyzing the share repurchase patterns of the Mercedes-Benz Group (MBG.DE) over the past two decades reveals limited buyback activity. There were years of significant reduction in shares outstanding, notably in 2004, 2008, and 2023. The average stock repurchase rate over 20 years is approximately 0.2567. While the buybacks suggest a trend towards returning value to shareholders via reduced share count in select years, the infrequency and inconsistency indicate this method is not a primary strategy for the group. Compared to many U.S. counterparts which consistently repurchase shares, MBG.DE does not exhibit a strong buyback culture. Consequently, its stock repurchase activities may not offer dependable predictive power for potential returns through capital management strategies. This trend isn't particularly strong for investors targeting firms with robust and regular buyback programs as a measure of returning shareholder value.