Last update on 2024-06-27

Martin Marietta Materials (MLM) - Dividend Analysis (Final Score: 6/8)

Detailed analysis of Martin Marietta Materials' (MLM) dividend policy with a score of 6/8. Learn about its performance, stability, and growth over 20 years.

Short Analysis - Dividend Score: 6

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

We analyzed Martin Marietta Materials (MLM) based on 8 criteria to see how it performs in terms of dividend policy. MLM scored a 6 out of 8. Here's a quick rundown: 1. **Dividend Yield**: MLM's dividend yield is 0.5612%, lagging behind the industry average of 1.68%. Over the years, their yield has been declining, suggesting the stock is more suitable for capital gains rather than regular income. 2. **Average Annual Growth Rate**: The dividend growth rate averaged 8.01% over 20 years. However, there were periods with no dividends, indicating sustainability issues. 3. **Payout Ratio**: On average, MLM’s payout ratio was 38.62%, which is good because it's below 65%. Yet, in some years it soared above this mark, hinting at potential sustainability problems. 4. **Earnings Coverage**: MLM has consistently managed to cover its dividends with earnings, which is a plus. 5. **Cash Flow Coverage**: The ratio of dividends covered by cash flow hasn't been ideal. Despite an increase in cash flow, covering dividends fully has been challenging. 6. **Stable Dividends**: MLM has steadily increased its dividends without significant drops, showing reliability. 7. **25+ Years of Dividend Payments**: MLM has been paying dividends for over 25 years, signaling strong financial health. 8. **Stock Repurchases**: MLM has been consistently buying back shares, which is shareholder-friendly.

Insights for Value Investors Seeking Stable Income

Martin Marietta Materials (MLM) shows some good traits such as a long history of dividend payments and consistent stock repurchases. However, its current low dividend yield and inconsistent cash flow coverage for dividends might be a concern for income-focused investors. If you're seeking regular income, MLM may not be the best choice. But if you're looking for a stock with capital growth potential and a steady dividend increase, MLM is 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 represents the annual dividend payment to shareholders expressed as a percentage of the stock's current price. It's critical for investors looking for regular income rather than capital gains.

As of 2023, Martin Marietta Materials (MLM) has a dividend yield of 0.5612%, which significantly lags behind the industry average of 1.68%. Such a trend indicates that MLM may not be the most attractive option for income-focused investors. Historically, MLM's dividend yield has seen fluctuations, peaking at 2.1217% in 2011. However, there is a clear declining trend over the past decade, with the yield dropping from 1.4503% in 2014 to 0.5612% in 2023. Despite consistent increases in dividend per share from $0.69 in 2003 to $2.8 in 2023, the closing stock prices have shown a strong uptrend from $46.97 in 2003 to $498.91 in 2023. This inverse relationship between stock price appreciation and dividend yield underscores MLM's attractiveness more for capital gains rather than for dividend income. This trend is not favorable for income-focused investors.

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

The Dividend Growth Rate is a measure of how much a company's dividend payments have increased over a specific period. It is crucial as it reflects the company's ability to generate earnings and distribute them to shareholders.

Based on the provided data, Martin Marietta Materials (MLM) had significant fluctuations in its dividend payouts over the past 20 years with an average dividend ratio of 8.01%. In certain years, dividends were not issued at all (2009-2012). For instance, in 2003, the dividend per share ratio was 18.97%, but this decreased to 10.14% by 2004 and varied drastically in the following years, even reaching 0% from 2009 to 2012. Recent trends show an increase, with the dividend per share ratio for 2023 at 10.24%. While the average dividend ratio exceeds the 5% benchmark, the inconsistency and periods of dividend omission raise concerns about sustainability and reliability. In summary, the trend shows the company's potential to pay dividends but requires scrutiny regarding consistency. Hence, while the growth rate seems encouraging, its fluctuations and large variability could be seen as a red flag for dividend-seeking investors.

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

The payout ratio measures the proportion of earnings a company pays to shareholders in the form of dividends. A lower payout ratio (below 65%) is often considered sustainable.

Reviewing the data from 2003 to 2023, Martin Marietta Materials' (MLM) payout ratio shows an average of 38.62%, significantly under the 65% mark deemed sustainable and healthy. This reveals a consistent ability to cover dividends with earnings. However, there have been deviations, such as in 2009 with a payout ratio of 82.75%, and in the subsequent years 2010 (75.37%), 2011 (88.95%), and 2012 (87.13%), indicating a potentially unsustainable practice if continued over the long term. Despite these anomalies, the overall trend is positive, showcasing robust fiscal management.

Dividends Well Covered by Earnings?

A company's dividends being well covered by its earnings means that the company generates sufficient profits to not only sustain but potentially increase its dividend payments. This is measured by the ratio of dividends per share to earnings per share, where a lower ratio indicates better coverage.

Looking at Martin Marietta Materials' earnings per share (EPS) against its dividend per share from 2003 to 2023, the trend is indicative of strong dividend coverage. The ratios range from as high as 0.827 in 2009, which was a challenging year economically, to as low as 0.148 in 2023. Most years have the ratio comfortably below 0.5, showcasing prudent financial management with an emphasis on maintaining a healthy coverage. This trend suggests that MLM has successfully managed to keep its dividend payments sustainable relative to its earnings. This is a positive trend, implying that MLM can weather economic downturns while still rewarding its shareholders.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is an important measure as it determines the company's ability to sustain dividend payments from the cash generated by its operations. A ratio above 1 is generally seen as a positive indicator.

The free cash flow (FCF) for Martin Marietta Materials (MLM) has seen a significant increase from $156.531 million in 2003 to $878.1 million in 2023. During the same period, the dividend payout amount has also risen from $33.714 million to $174 million. Despite the growth in both FCF and dividend payouts, the ratio of dividends covered by cash flow has not consistently remained above 1. For instance, in 2003, the ratio was 0.21, indicating that only 21% of dividends were covered by FCF. In 2023, the ratio is 0.198, meaning only 19.8% of dividends are covered by FCF. This trend suggests that MLM's ability to cover dividends with cash flow remains a challenge. A strong positive ratio is essential as it indicates the sustainability of dividends without relying on external financing or cash reserves. Therefore, the observed trend is concerning and points to potential issues in MLM's dividend sustainability despite increased cash flow over the years. Continuous monitoring and a strategic review of cash flow utilization might be warranted for future stability.

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.

When examining the dividend per share data for Martin Marietta Materials (MLM) spanning from 2003 to 2023, it is evident that the company has consistently increased its dividend payout over the years. Notably, there were no instances where the dividend per share decreased by more than 20%. The dividends started at $0.69 in 2003 and have steadily grown to $2.80 in 2023, reflecting a commendable stability and growth trend. For income-seeking investors, this historical consistency suggests a strong commitment by MLM to returning value to shareholders through dividends. This trend is favorable, showcasing a reliable income stream and potentially enhancing investor confidence in MLM's financial health and management efficacy. Furthermore, such a steady increase in dividends can serve as a hedge against inflation, making MLM an attractive option for conservative and income-focused investment portfolios.

Dividends Paid for Over 25 Years?

A consistent history of dividend payments over 25 years indicates a company’s unwavering commitment to returning value to shareholders. It reflects financial stability and disciplined capital allocation.

Martin Marietta Materials (MLM) has shown a steadfast commitment to returning value to its shareholders by paying dividends consistently for over 25 years. Starting at $0.5 per share in 1998 and increasing to $2.8 per share in 2023 demonstrates not only their resilience but also their financial stability and growth. From mere $0.5 in 1998 up to $2.8 per share signifies an increase of 460%. This long-term trend underscores the company's strong financial health and discipline in capital management which is an excellent trait for income-focused investors. Hence, this long-term dividend record, coupled with consistent increases, tends to be viewed very positively.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over an extended period indicate a company's commitment to returning value to shareholders. Share repurchases often signal that the company believes its stock is undervalued, and they can also help boost earnings per share (EPS) by reducing the number of shares outstanding.

The trend in the number of shares for Martin Marietta Materials (MLM) over the past 20 years shows significant stock repurchasing activity during various periods. MLM has repurchased shares in 12 of the last 20 years, with notable reductions in share count in years like 2004-2008 and 2016-2023. This suggests a pattern of strategic buyback initiatives. The average repurchasing amount of 1.3726 million shares per year further indicates a consistent approach towards buybacks. This overall trend is positive and signifies a shareholder-friendly policy, enhancing long-term shareholder value.