Last update on 2024-06-27

Nordson (NDSN) - Dividend Analysis (Final Score: 7/8)

Explore Nordson (NDSN) dividend analysis, showcasing a robust 7/8 final score. Evaluate performance, stability, and future growth prospects.

Short Analysis - Dividend Score: 7

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

The analysis used eight criteria to evaluate the performance and stability of Nordson's (NDSN) dividend policy. Nordson scored 7 out of 8, performing well in most areas but not quite matching the industry's average dividend yield. While Nordson's dividend yield has been trending down, its average annual dividend growth rate and payout ratio are favorable, indicating significant periods of positive growth and disciplined financial management. The company has consistently paid and covered its dividends well through earnings and free cash flow. It has a solid history of paying dividends for over 25 years and has shown reliable stock repurchases in the past 20 years, reflecting strong management and financial stability.

Insights for Value Investors Seeking Stable Income

Nordson appears to be a strong dividend-paying company with a solid financial footing and robust management. While its dividend yield is lower than the industry average, the company excels in dividend growth, payout ratios, and coverage by earnings and cash flow. If you are an investor looking for stability, consistent payment, and growth potential, Nordson could be worth considering. However, those who prioritize high dividend yields might want to explore other options.

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 the annual dividend payment divided by the stock price. It shows the return on investment through dividends alone and is important for income-focused investors.

With a dividend yield of 1.007%, Nordson is underperforming compared to the industry average of 1.57%. Over the last 20 years, Nordson's dividend yield has generally trended downwards from a high of 2.267% in 2008 to its current level. For instance, in 2020 and 2021, its yield dropped to below 1%, reaching even 0.7051% in 2021. This decline could potentially be a negative signal for dividend-focused investors seeking higher yield. While Nordson has increased its dividend per share from $0.305 in 2003 to $2.66 in 2023, its stock price has risen significantly, from $17.305 in 2003 to $264.16 in 2023, outpacing the growth in dividends and thus keeping the yield relatively low. In contrast, the industry average has been more stable and higher, indicating that Nordson might not be the best option for those investors prioritizing dividend yield.

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

The dividend growth rate is a measure of the annualized percentage rate of growth of a company's dividend payments. It provides insight into a company's financial health and its ability to increase returns to shareholders over time.

Over the last 20 years, Nordson (NDSN) has displayed a highly variable dividend per share ratio, with values ranging from -9.7222% to as high as 48.4848%. While the average growth rate is 11.92%, indicating overall positive growth, the individual yearly figures show considerable fluctuations. Despite significant dips in some years, the overall trend above the 5% mark is favorable, denoting robust health and consistent value return. This trend reflects positively on Nordson's financial strategy and promises sustained shareholder value.

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

The average payout ratio measures the proportion of earnings paid to shareholders as dividends. It is crucial as it reflects a company's ability to sustain dividends without compromising stability.

The available data shows that Nordson (NDSN) has an average payout ratio of approximately 24.39% over the last 20 years. This payout ratio is considerably lower than the critical threshold of 65%. Such a low payout ratio suggests that the company has retained a substantial portion of its earnings for reinvestment or other purposes, which could be a sign of strong financial health and prudent management. Additionally, with payout ratios consistently below 65% in each of the 21 years covered, the company has demonstrated a disciplined approach to dividend distribution. This trend is favorable as it indicates Nordson has ample room to maneuver in terms of increasing dividends in the future without overextending itself financially.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The Earnings Per Share (EPS) data of Nordson (NDSN) from 2003 to 2023 shows a steady growth with some fluctuations. Occasional dips, such as those seen in 2009 (due to the global financial crisis) and in 2020 (likely reflecting impacts of the COVID-19 pandemic), were evident. However, EPS generally recovered strongly in the subsequent years. For instance, between 2003 and 2023, EPS rose from $0.5186 to $8.539, indicative of robust earnings growth. During the same period, dividends per share also increased from $0.305 to $2.66. Importantly, despite the overall increase in dividend payouts, the percentage of dividends covered by earnings remained comfortably high, peaking well over 0.25 in many years. In 2023, EPS stood at $8.539, while the dividend was $2.66 per share, giving a coverage ratio of approximately 0.311. This indicates that Nordson is earning sufficiently more than it pays out in dividends, providing a comfortable margin for dividend safety. The consistently high dividend coverage ratio suggests a good trend for the company's ability to maintain and potentially grow dividends in the future. Thus, the trend is positive and bodes well for income-focused investors.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is an important criterion as it ensures that the company generates enough cash to comfortably pay dividends without compromising its financial health.

Nordson's free cash flow (FCF) versus dividend payout analysis shows an encouraging trend in several years. The coverage ratio has maintained itself above or near 20% for most years, which implies that the company typically generates substantially more cash than required for dividend payments. Higher FCF allows a firm to cover its dividend payments comfortably, sustain future growth, and withstand economic downturns. For instance, in 2023, Nordson reported a free cash flow of $606.7 million against a dividend payout of $150.4 million, indicating a coverage ratio around 25%, which is adequate and ensures the sustainability of the dividend. Therefore, while there have been some fluctuations, Nordson has generally maintained a prudent and comfortable level of cash flow coverage on its dividends—a positive sign for dividend stability and financial health.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Nordson (NDSN) and why it is important to consider

The Dividend stability for the recent 20 years shows that dividends per share gradually increase, but with some fluctuations, such as in 2018 reflecting a slight decline before continuing its growth trend in subsequent years. Overall, the trend is good as upward growth signifies good dividends stability.

Dividends Paid for Over 25 Years?

Companies with a track record of consistently paying dividends for over 25 years demonstrate financial stability and a shareholder-friendly approach.

Nordson (NDSN) has consecutively paid dividends for over 25 years, as evidenced by the dividend per share data provided from 1998 to 2023. Starting from a dividend per share of $0.225 in 1998 and consistently increasing to $2.66 in 2023, this trend underscores Nordson's commitment to returning value to its shareholders. The steady rise in dividends per share over multiple decades showcases the company's robust financial health and stability. This is a favorable trend, significantly boosting investor confidence and portraying Nordson as a reliable long-term investment.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases involve the company buying back its own shares over a specific period. It indicates management's confidence in the company's future prospects and can enhance shareholder value by reducing the number of outstanding shares.

Nordson (NDSN) has shown consistent stock repurchase activities over the past 20 years. The list of reliable repurchase years like 2005, 2006, 2009, and so forth, signifies recurring buyback programs. Their average repurchase rate of -0.8104 indicates that the company has actively reduced its outstanding share count. Such a trend is beneficial for existing shareholders as it often leads to higher earnings per share (EPS) and can signal management's confidence in long-term growth prospects. Additionally, share repurchases can be more tax-efficient than dividends as a means of returning capital to shareholders.