Last update on 2024-06-27

News (NWS) - Dividend Analysis (Final Score: 6/8)

Evaluate News Corp's (NWS) dividend policy with a 6/8 score. Understand its performance and stability through detailed criteria.

Short Analysis - Dividend Score: 6

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

The analysis assesses News Corp (NWS)'s dividend performance using an 8-criteria scoring system, rating it 6 out of 8. Key points include a current dividend yield of 0.7776% which is below the industry average of 0.96%, and an inconsistent historical yield. NWS hasn't demonstrated a consistent average annual growth rate above 5%. There have been irregularities in dividend payouts, particularly with negative earnings impacting the payout ratio. The coverage of dividends by free cash flow has been consistently low. Dividends have only been paid since 2015, showing no long-term stability. The brief history of dividends makes it ineligible for a 25-year consistency record. Reliable stock repurchases were not assessed in depth here, but are generally important for long-term shareholder value.

Insights for Value Investors Seeking Stable Income

While News Corp (NWS) offers some moderate stability with consistent dividends since 2015, its overall dividend performance is lacking with a low yield and coverage concerns. Given the risky trend and insufficient long-term data, it may not be the best option for income-focused investors seeking reliable and growing dividends. Investors could consider looking into other companies with stronger dividend performance histories.

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 income an investor receives from an investment. It provides an indicator of the income-generating potential of a stock relative to its price. It is important as it helps investors compare the attractiveness of dividend-paying stocks.

As of 2023, News Corp's dividend yield stands at 0.7776%, which is notably lower than the industry average of 0.96%. Over the past 20 years, News Corp has shown fluctuations in its dividend yield, peaking at 1.7316% in 2018. On the contrary, the industry average has seen a consistent decline from a high of 8% in 2010 to 0.96% in 2023. This downward trend in the industry could reflect broader economic dynamics, potentially including lower interest rates or a shift toward growth stocks, which traditionally pay lower dividends. Furthermore, the consistency of News Corp’s dividend payments, establishing a dividend per share of $0.2 since 2015, might indicate stability and reliability, albeit with a recent decline in yield. When comparing these metrics alongside the stock price, particularly the significant rise to $25.72 in 2023 from $17.83 in 2013, it suggests that the growth in stock price outpaced dividend yield, potentially directing investor focus onto capital gains. This trend is typical in growth-oriented periods where capital appreciation is favored over dividend yield. However, the current lower yield compared to the industry average indicates lesser immediate income benefit, positioning the stock as a moderate option for dividend-seeking investors.

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

The dividend growth rate measures the percentage increase in dividends paid per share over a specified period. A growth rate higher than 5% indicates strong and consistent performance and commitment to rewarding shareholders, which often attracts income-focused investors.

Based on the data provided, News (NWS) had only one year, 2016, where it paid dividends, with a unique 100 dividend per share ratio, and no other years of dividends from 2010 to 2023. This irregular dividend history suggests no consistent trend in dividend growth, making the criterion invalid. Thus, the lack of regularity in dividends payment did not contribute to an average dividend ratio indicating sustained growth over the last 14 years, let alone 20 years. This trend is unfavorable for long-term, income-driven investors who rely on stable and predictable dividend growth.

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

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

The payout ratio, which measures the percentage of earnings paid out as dividends to shareholders, is a crucial indicator of a company's dividend sustainability. For News Corp (NWS), a consistently low payout ratio over 20 years indicates robust earnings retention for growth, while also providing reasonable returns to shareholders.

Dividends Well Covered by Earnings?

It is important to ensure that dividends are well covered by earnings because it indicates the sustainability of the dividend payments. If a company consistently pays more in dividends than it earns, it may need to cut dividends in the future, borrow to make payments, or dip into its cash reserves, which can be unsustainable in the long-term.

Examining the trend from 2010 to 2023, we notice that News Corp's earnings per share (EPS) have shown significant volatility, including several years of negative earnings (2012, 2015, 2017, 2018, 2020). Despite this, the company started paying dividends in 2015 with a consistent dividend per share of $0.2 from that year onwards. However, the divisional coverage ratio, which compares EPS with dividends per share, has largely been below 1, indicating insufficient earnings to cover dividend payments. The coverage ratio was negative in several years, notably worse in years with negative EPS. In certain years, such as 2016, 2019, and 2023, the coverage ratio has shown more promise at 0.65, 0.75, and 0.77 respectively. This indicates that the dividends were nearly covered by the earnings in those years. However, overall, the trend demonstrates inconsistency, suggesting potential difficulties in maintaining dividend payments purely from earnings. Thus, relying on dividend payments from News Corp might carry some risk, especially in less profitable years.

Dividends Well Covered by Cash Flow?

Explain the criterion for News (NWS) and why it is important to consider what the nature of such analyses is.

The primary purpose of examining whether dividends are well covered by cash flow is to assess the financial health and sustainability of the company's dividend payments. Ideally, a healthy ratio is above 1, meaning free cash flow exceeds the dividend payout. However, in the case of News Corp (NWS), the coverage ratio is consistently below 1, indicating that free cash flow has often been insufficient to cover dividend payments. This is a concerning trend for dividend sustainability. For instance, in the years from 2010 to 2013, the ratio was critically low, reflecting higher dividend payouts relative to free cash flow. The situation improved somewhat in the subsequent years, with the ratio reaching its peak in 2017 (0.64), following a positive trend, before declining again in the following years. The consistently low ratios imply that News Corp (NWS) may face challenges maintaining these dividend payments without relying on external financing or liquidating assets.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are crucial for income-seeking investors as it indicates reliability of income and risk mitigation from fluctuations.

The dividend per share for News Corp (NWS) has shown significant inconsistency over the past 20 years. For the first several years, i.e., from 2010 to 2015, there were no dividends issued at all. The introduction of dividends started in 2015, with stability observed from 2015 to 2023, where dividends per share have remained relatively constant at 0.2. There is, however, a noticeable lack of long-term historical stability, given the absence of any dividends for the first half of the given years. The data indicates overall volatility which is a negative indicator. For income-seeking investors prioritizing stability, the trend appears unfavorable as the significant drop more than 20% is quite evident at the outset of the considered period.

Dividends Paid for Over 25 Years?

This criterion examines whether the company has consistently paid dividends for over 25 years. Consistent dividend payments can be an indicator of financial stability and a commitment to returning value to shareholders.

The data shows that News Corp (NWS) began paying dividends in 2015 with an initial dividend per share of $0.1, and this figure has remained steady at $0.2 from 2016 to 2023. Therefore, the company has only a 9-year history of paying dividends, which falls short of the 25-year requirement. This relatively short dividend history can be viewed cautiously by long-term dividend investors. Consistency in paying dividends over multiple decades can indicate a company's resilience and its ability to generate steady cash flows. In this case, News Corp's performance does not fulfill the criterion, reflecting a cautionary sign for investors prioritizing long-standing dividend reliability. It neither reflects particularly positively nor negatively in the short term but fails to prove long-term dividend commitment.

Reliable Stock Repurchases Over the Past 20 Years?

What constitutes reliable stock repurchases and why this matters for long-term shareholder value

Stock repurchases, often known as share buybacks, signify a company's confidence in its future prospects and a commitment to returning value to shareholders. Companies that consistently execute buybacks are generally believed to generate excess cash, which can be seen as a positive indicator of financial health. Reliable stock repurchases over a long period often reflect a sustainable strategy and operational success, positively impacting shareholder confidence and stock price stability.