Last update on 2024-06-27

Nemetschek (NEM.DE) - Dividend Analysis (Final Score: 3/8)

Analyze Nemetschek (NEM.DE) dividend policy score: 3/8. Insights on performance, stability, yield vs. industry, and 20-year payout ratio.

Short Analysis - Dividend Score: 3

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

Nemetschek (NEM.DE) scores 3 out of 8 on the dividend stability and performance criteria. Here's what we found: 1. **Dividend Yield:** Currently at 0.5734%, which is below the industry average of 0.79%. Historically, the yield has been very volatile and significantly higher in the past. The current yield suggests stability but is less attractive for income-focused investors. 2. **Dividend Growth Rate:** The average annual growth rate over the last 20 years is not specified but is implied to be volatile. 3. **Payout Ratio:** Nemetschek has an average payout ratio of 212.89%, far exceeding the ideal 65%. This raises concerns about the sustainability of its dividends. 4. **Earnings Coverage:** Dividends have not always been well-covered by earnings. Some years show extremely high ratios, indicating unstable or unsustainable payouts. 5. **Cash Flow Coverage:** Generally positive, with a current ratio of 0.216. This suggests dividends are within the company's financial means, backed by robust free cash flow. 6. **Stable Dividends:** Nemetschek's dividend payments have been inconsistent and volatile over the years. 7. **History of Dividends:** Nemetschek hasn't consistently paid dividends for over 25 years. The dividend history has gaps and significant variations. 8. **Stock Repurchase:** There has been only one stock repurchase in the last 20 years, making it an unreliable criterion for Nemetschek.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Nemetschek may not be the best choice for dividend-focused investors seeking stable and high-yield dividends. The high payout ratio and inconsistent dividend history raise concerns about long-term sustainability and reliability. However, its strong free cash flow and significant growth in stock price may appeal to growth-focused investors. If you're looking for stable dividends as a primary investment criterion, you might want to look elsewhere. But if you're interested in a company that reinvests in growth with sporadic but growing dividends, Nemetschek might still be 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 measures the annual dividend payments relative to the stock's price. Higher yields can indicate a profitable income stream.

Nemetschek's current dividend yield is 0.5734%, which is lower than the industry average of 0.79%. While dividend yields are historically volatile for Nemetschek, the overall trend has significantly declined from past values like 42.735% in 2005 and 74.7126% in 2008 down to below 1% in recent years. This relatively lower yield might illustrate a more stable yet less lucrative dividend profile. Since dividends are an essential component of total shareholder return, the present yield may be less attractive for income-focused investors. However, considering the stock price surge from 0.51 in 2003 to 78.48 in 2023, the company might be prioritizing reinvestment and growth over high dividend payouts.

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

Explain the criterion for Nemetschek (NEM.DE) and why it is important to consider

Dividend growth rate is a measure of the annualized percentage growth rate of a company's dividend payments. A growth rate higher than 5% is considered strong and can be a sign of a company's robust financial health and optimistic future prospects.

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

The Payout Ratio is the percentage of earnings paid to shareholders in dividends. A lower average payout ratio typically suggests that the company is reinvesting a significant proportion of its earnings into the business rather than distributing it all to shareholders.

The average payout ratio of 212.89% over the last 20 years is alarmingly high, greatly exceeding the 65% benchmark. This indicates that Nemetschek (NEM.DE) has distributed more earnings as dividends than it has retained, particularly reflected in the years with ratios exceeding 400% like 2005, 2008, 2011, and 2012. These figures suggest potential sustainability issues in the long run, as exceedingly high payout ratios often flag financial instability or a lack of reinvestment into the company's growth. This trend is generally negative as it undermines financial resilience and long-term capital appreciation prospects for investors.

Dividends Well Covered by Earnings?

The criterion evaluates if the dividends paid by a company are sustainable given the earnings it generates. A ratio below 1 indicates that dividends exceed earnings, potentially leading to financial instability.

Considering Nemetschek's data from 2003 to 2023, there appears to be inconsistency in the coverage of dividends by earnings. For example, in 2005, the ratio was excessively high (4.75) due to low earnings, suggesting an unsustainable dividend. Similarly, years like 2008 and 2011 saw over 5x coverage, yet there were instances (2009) of dividends being completely covered. Recently, the trend shows more sustainable ratios, but values below 1 indicate potential issues. Improvement in EPS versus dividends in recent years indicates positive but cautious outcome.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is an important criterion as it shows if a company generates enough cash to cover its dividend payments. A higher ratio means the company has sufficient cash flows to pay dividends, which indicates good financial health and sustainability of dividends.

The Free Cash Flow (FCF) of Nemetschek has shown a robust increasing trend from €13.967 million in 2003 to €240.202 million in 2023. On the other hand, the dividend payout amount has also increased but at a slower rate, growing from €0 in initial years to €51.975 million in 2023. The ratio of dividends covered by cash flow has been fluctuating but largely remains positive, indicating that dividends are generally within the means generated by free cash flow. For example, in 2023 the ratio stands at 0.216, meaning the company pays out about 21.6% of its Free Cash Flow in dividends. This is generally a positive trend, even though the higher ratios in 2003 and 2005 were due to a complete absence of dividend payouts in those years. Overall, this indicates that Nemetschek is able to comfortably sustain its dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends refer to the company's ability to consistently pay out dividends over time without significant reductions, reflecting financial health and reliability.

Nemetschek shows volatility in its dividend payments over the past 20 years rather than stability. Notable deviations include no dividends in 2003, 2004, and 2009, and sharp decreases like in 2016 (from 1.60 to 0.1667) and 2022 (from 0.6 to 0.39). This trend suggests the company has faced financial difficulties or strategic shifts affecting its dividend policy, which can be concerning for income-seeking investors who prioritize stable dividend payouts.

Dividends Paid for Over 25 Years?

Analyzing whether a company has consistently paid dividends for over 25 years helps in understanding the company's historical commitment to returning value to shareholders.

Based on the provided data, Nemetschek (NEM.DE) has not consistently paid dividends for 25 years. The dividend history starts in 2002, with a few years showing no dividends (2008 and periods before 2005). Even when dividends were paid, there were instances of variation in dividend per share amounts (e.g., 2004's €0.5, 2007's €0.56, and 2015's €1.6). Overall, the trend indicates fluctuating commitment towards dividend payout with recent years showing more stable dividend payments. Therefore, this historical inconsistency may be categorized as a negative trend for long-term dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the consistent buyback of shares over a significant period, indicating company strength and confidence.

Nemetschek (NEM.DE) displays a single instance of share repurchase over the last 20 years, specifically in 2005. The total number of outstanding shares has remained largely unchanged since then at approximately 115.5 million. The average repurchase over this period is effectively 0%. This lack of consistent stock buybacks suggests that Nemetschek has not prioritized this method of returning value to shareholders. This trend is generally unfavorable for investors seeking direct capital returns via share buybacks; however, the company may be using alternative approaches to enhance shareholder value. Nonetheless, the stability in the number of shares could also indicate steady business operations without significant restructuring.