Last update on 2024-06-27

M&T Bank (MTB) - Dividend Analysis (Final Score: 7/8)

Analyze the stability and performance of M&T Bank's (MTB) dividends using an 8-criteria scoring system. Final score: 7/8 indicates robustness.

Short Analysis - Dividend Score: 7

We're running M&T Bank (MTB) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

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 relative to its stock price. It's important as it measures income on investment.

M&T Bank (MTB) has a current dividend yield of 3.7934%, which stands above the industry average of 2.76%. Historically, M&T Bank's dividend yield has fluctuated but has generally trended upward, particularly during and after financial crises (e.g., 2008: 4.8772%). In comparison, the industry's dividend yield has been more stagnant. This above-average yield indicates a potential for better income returns for investors relative to the industry norm, which is a positive signal.

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

The Dividend Growth Rate represents the annualized percentage rate of growth that a stock's dividend undergoes over a period of time. A higher growth rate suggests robust financial health and a commitment to rewarding shareholders.

Over the last 20 years, M&T Bank (MTB) has experienced a fluctuating Dividend Growth Rate. The Dividend Per Share Ratio data reveals significant variations, with high growth rates in some years and stagnation or even negative growth in others. Specifically, years like 2004 and 2017 show exceptional growth rates of 33.3333% and 33.9286%, respectively, while in 2009 and several subsequent years, the growth rate dropped to 0%, indicating no dividend increase. More recently, the growth rates have stabilized but remain modest, with figures such as 6.6667% in 2022 and 8.3333% in 2023. Despite these fluctuations, the average growth rate over the 20-year period stands at 8.451971428571428%. This is comfortably above the 5% threshold, indicating a generally positive long-term trend. While variability in dividend growth may raise some concerns regarding consistency, the average figure paints a picture of solid overall performance in terms of dividend growth.

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

The average payout ratio measures the percentage of earnings a company pays out as dividends to shareholders. An average payout ratio below 65% indicates that the company is retaining enough earnings for reinvestment, growth, or to weather economic downturns.

M&T Bank (MTB) has had an Average Payout Ratio of 37.82% over the past 20 years. Observing the year-by-year data, the payout ratio has varied, with a significant spike in 2009, reaching 84.60%. However, this spike was an outlier compared to other years where the payout ratio generally remained below the 65% threshold. This trend is healthy for MTB as it illustrates a conservative approach to capital distribution, ensuring substantial earnings are reserved for growth and stability. Given this historical trend, MTB has efficiently balanced rewarding shareholders with retaining profits for business reinvestment.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings indicates the company's ability to sustain dividend payments without jeopardizing its financial health.

The ratio of dividends per share covered by earnings per share for M&T Bank (MTB) shows a trend that averages around 40% over the years. Notably, in years like 2009 and 2020, the coverage ratio spiked to more than 50%, being 84.60% and 41.84% respectively, which could be a result of economic downturn impacts. EPS has generally been able to cover dividends well, and lower percentages below 50% are traditionally good as they indicate sustainability. Recent years show a strong earnings coverage with values well below the 50% threshold, indicating that M&T Bank is in a stable position to continually pay dividends, which is a positive trend.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow measures how much of company’s dividends can be paid from its free cash flow. It’s crucial for sustainability.

The percentage values of dividends covered by cash flow from 2003 to 2023 vary widely, from a low of ~0.11 in 2003 to a high of over 1.03 in 2020. Generally, a ratio above 1 indicates that the company’s free cash flow sufficiently covers its dividend payouts, indicating financial stability and sustainability of dividend payments. For M&T Bank (MTB), the ratios fluctuate but are consistently above 0.2, showing a reasonable potential to cover dividends most years. The most concerning year would be 2003, with a low ratio of 0.11, indicating a potential strain on cash flow. The peak in 2012 and 2020 shows excellent coverage, alleviating concerns for those years. Overall, the trend suggests moderate to strong coverage, although the fluctuations warrant close monitoring.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years. 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.

Before diving into a year-by-year analysis, it's crucial to clarify that for a dividend to be considered stable, it should not have experienced a drop of more than 20% from the dividend paid in the previous year. A consistent dividend payout signals strong financial health and reliability. Looking at M&T Bank (MTB), between 2003 to 2023, there are instances where the dividend payouts have either increased or remained stable. Notably, there is no year where the dividend dropped by more than 20% compared to the prior year's dividend. In 2004, dividends increased from $1.2 to $1.6, and the pattern of steady or rising dividends continues throughout the two decades. In terms of year-over-year stability, consider the following key data points: 1. From 2003 to 2014, dividends rose gradually and consistently. 2. In 2015, dividends remained static at $2.8 per share, but didn't experience a drop. 3. From 2016 onwards, the dividend per share has seen a steady increase, reaching $5.2 in 2023. Thus, the trend is positive for income-seeking investors who prioritize dividend stability.

Dividends Paid for Over 25 Years?

Criterion 6 examines whether a company has consistently paid dividends for over 25 years. Long-term dividend payments indicate stability and commitment to returning value to shareholders.

M&T Bank (MTB) has consistently paid dividends for each year over the past 25 years, starting from 1998 through 2023. The dividend per share has generally increased over time, rising from $0.38 in 1998 to $5.20 in 2023. This consistency reflects positively on M&T Bank's financial stability and its ability to generate sufficient cash flow to reward shareholders. The steady increase in dividend payout per share further underscores its commitment to delivering shareholder value. This long-term reliability in dividend payments is a great indicator of financial health and investor confidence in the company.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for M&T Bank (MTB) and why it is important to consider

Examining reliable stock repurchases over the past 20 years for M&T Bank (MTB) is crucial for understanding their commitment to returning value to shareholders. Consistency in stock repurchases can indicate robust financial health, confidence in future performance, and a shareholder-friendly management strategy. With fluctuations observed in their share counts and notable repurchases in specific years, it's essential to evaluate how these repurchases align with broader market conditions and the bank's financial strategies to determine if the trend is positive or negative.