Last update on 2024-06-27

Mondelez (MDLZ) - Dividend Analysis (Final Score: 5/8)

Mondelez (MDLZ) Dividend Analysis: Performance, stability, and scoring based on 8 key criteria. Get insights on MDLZ's dividend sustainability over 20 years.

Short Analysis - Dividend Score: 5

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

Mondelez (MDLZ) scored 5 out of 8 on the dividend analysis. Some of the strengths include a dividend yield higher than the industry average, dividends well covered by earnings, and maintained stable dividends over the past 20 years. However, the company showed inconsistency in dividend growth, an average annual payout ratio higher than 65%, and cash flow covering dividends were not robust. They also paid dividends for over 25 years and demonstrated somewhat reliable stock repurchases.

Insights for Value Investors Seeking Stable Income

Given the decent dividend yield and coverage by earnings, investing in Mondelez might be worthwhile for those seeking income. However, consider the inconsistencies in dividend growth and the payout ratio's risk implications before making a decision. Overall, it seems a decent investment, but with some caution required.

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 represents the ratio of a company's annual dividend compared to its share price. It is crucial as it indicates the income earned from an investment relative to its price.

Mondelez's current dividend yield of 2.24% is above the industry average of 2.05%, marking it as an attractive income investment. Over the past 20 years, Mondelez's dividend yield has typically outperformed the industry, barring a few anomalies like the spike in 2012. Despite fluctuations, consistency with high yields compared to the industry reinforces investor confidence, indicating management's commitment to returning capital to shareholders.

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

The Dividend Growth Rate analysis assesses how consistently a company has increased its dividend payouts over time, an important metric for income-focused investors.

Analyzing the dividend per share ratio values of Mondelez (MDLZ) from 2003 to 2023, it is clear there is significant volatility. In particular, the ratio fluctuated heavily, peaking in 2012 with an outlier value of 1208.0172% and dipping into negative values in some years. When examining the trend, we notice inconsistency, interspersed with zero and significantly low digits. This erratic pattern signals poor dividend growth reliability. With the average dividend ratio around 61.21%, it's evident that the company's future dividend growth potential is questionable and may not meet the 5% growth rate requirement adhered to by prudent investors seeking steady income growth.

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

Criterion 1.2 analyzes whether the Average Payout Ratio over the last 20 years is lower than 65%, which is essential for understanding a company's sustainability in paying dividends without compromising growth or taking on too much debt.

The Average Payout Ratio of Mondelez (MDLZ) over the past 20 years is 89.11%. This is significantly higher than the threshold of 65%. Payout Ratios over time indicate how well a company can sustain its dividends. Lower ratios suggest that the company is retaining more earnings for growth, while higher ratios could signal risks in maintaining dividend payments. In 2012, the spike to 896.43% heavily skews the average. Excluding this outlier, recent years consistently show ratios closer to the target, though still occasionally exceeding 65%, such as in 2017 (68.27%) and 2022 (74.56%). This trend poses a risk to dividend sustainability.

Dividends Well Covered by Earnings?

Earnings per share (EPS) measures a company's profitability, while dividends per share (DPS) represent the cash paid out to shareholders. The ratio of DPS to EPS indicates a company's ability to cover dividends with earnings.

Mondelez (MDLZ) has a consistently low ratio of dividends per share covered by earnings per share from 2003 to 2023, with the exception of anomalous years like 2012 when the ratio spiked to 8.96 due to a dividend outlier. The ideal trend should ideally show a ratio comfortably below 1, preferably between 0.4 and 0.6, indicating that dividends are well-covered by earnings. Mondelez generally maintains this range, which is positive for dividend stability. However, the very low ratio in 2015 (0.14) and the unusually high ratio in 2012 point to specific events that may need further analysis to understand any underlying issues or extraordinary events affecting dividends and earnings in those years.

Dividends Well Covered by Cash Flow?

Explain what it means for a company's dividends to be well covered by cash flow. Discuss why this is an important metric to consider for investors.

For Mondelez (MDLZ), the free cash flow (FCF) has varied over the years, ranging from $1.57 billion in 2017 to $4.79 billion in 2013. During the same period, the dividend payout amount has steadily increased from around $1.09 billion in 2003 to $2.16 billion in 2023. A critical ratio for assessing the sustainability of dividends is the coverage ratio, which is calculated as FCF divided by total dividends paid. This ratio has fluctuated significantly, encouraging in some years but raising red flags in others. Notably, in 2009, the ratio fell below 1, meaning Mondelez's dividends exceeded its FCF, resulting in a payout amounting to 104.22% of FCF. Conversely, in 2013, the coverage ratio dramatically improved to 4.79. Over 20 years, the company maintained an average ratio in the range of 0.5 to 0.75, generally suggesting that dividends were covered by cash flows but not robustly. For investors, a long-range view shows Mondelez's cash flow can reasonably cover its dividends, but tighter cash flow years like 2009 do highlight potential risk areas for dividend cuts.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years signify income security and reliability, which is imperative for income-seeking investors who depend on consistent earnings from their investments.

When examining Mondelez's (MDLZ) dividends over the past 20 years, it's critical to identify if any year saw the dividend per share decrease by more than 20%. Based on the provided data, full years ranged from 2003 to 2023 and dividend per share values ranged from $0.66 in 2003 to $1.62 in 2023. Noteworthily, there were significant anomalies in the data: in 2012, the dividend per share surged drastically to $15.173, which seems irregular given the preceding ($1.16) and subsequent values ($0.67 in 2013). Excluding this outlier (assuming it may involve exceptional circumstances like stock splits, special dividends, or data errors), there was no year with a 20% drop in the dividends, signaling overall stability for income-focused investors.

Dividends Paid for Over 25 Years?

Explain the criterion for Mondelez (MDLZ) and why it is important to consider

Dividends paid for over 25 years is a measure of a company's consistency and commitment to returning value to shareholders. It indicates financial stability and reliability. For Mondelez (MDLZ), the metric showcases the company’s ability to maintain and grow its dividends over long periods, reflecting its robust business model and strong earning capacity.

Reliable Stock Repurchases Over the Past 20 Years?

Examining reliable stock repurchases involves addressing the company’s commitment to returning capital to shareholders by buying back shares. This can indicate confidence in the company’s future prospects and can help to boost earnings per share.

Over the past 20 years, Mondelez (MDLZ) has demonstrated a somewhat consistent strategy of repurchasing its shares, as evidenced by the reduced number of shares outstanding in several years. From 2004 to 2009, there was a notable decrease from approximately 1.72 billion to 1.51 billion shares. Despite some fluctuations, including an increase in 2010 and 2011, the overall trend resumed with reductions from 2013 through to 2023, culminating in approximately 1.36 billion shares in 2023. This results in an average annual repurchase rate of -1.0884%. The relatively consistent share repurchase over these periods underlines a positive trend in returning value to shareholders, though the rise in shares during specific years like 2010 and 2011 may need further explanation. Overall, this trend of minimizing outstanding shares is beneficial as it can enhance earnings per share and signal confidence from the company's management.