Last update on 2024-06-27

Universal Display (OLED) - Dividend Analysis (Final Score: 6/8)

Explore Universal Display's (OLED) dividend analysis, evaluating performance and stability against an 8-criteria scoring system. Final Score: 6/8.

Short Analysis - Dividend Score: 6

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

Here's a summary of the dividend analysis for Universal Display (OLED): 1. **Dividend Yield**: High at 0.732% compared to the industry average of 0.34%, indicating strong returns for income-focused investors. 2. **Growth Rate**: Shows a solid trend since they began paying dividends in 2017, starting from 0.0695% and peaking at 1.1107% in 2021. 3. **Payout Ratio**: Low at 5.09%, much below the 65% threshold, which means the company retains most of its earnings for growth. 4. **Earnings Coverage**: Mixed history; dividends not robustly covered by earnings yet, raising sustainability concerns. 5. **Cash Flow Coverage**: Good recent performance with a 2023 ratio of 2.348, indicating strong cash flow coverage. 6. **Dividend Stability**: Strong growth since 2017 without drops over 20%, showing stability. 7. **Long-Term Dividends**: Only paying dividends since 2017, lacking the historical stability of older companies. 8. **Stock Repurchases**: Fluctuating repurchases with a dilutive trend due to higher equity issuance.

Insights for Value Investors Seeking Stable Income

Universal Display (OLED) shows promise with a high dividend yield, strong growth, and good cash flow coverage. However, the mixed history of earnings coverage and recent, short dividend payment history may pose risks. Investors looking for long-term stability might find the company less appealing compared to those with over 25 years of dividend history. Overall, OLED's commitment to increasing dividends and stable payments since 2017 is positive, but proceed with caution and consider long-term growth prospects and sustainability before investing.

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 dividends paid out by a company as a percentage of its stock price. It is a crucial indicator for income-focused investors, reflecting a company's ability to generate earnings and distribute them as dividends.

Universal Display's current dividend yield of 0.732% notably surpasses the industry average of 0.34%, which is positive for income-seeking investors. Over the last 20 years, OLED's dividend yield has seen significant growth since it started paying dividends in 2017 at 0.0695%, reaching a peak of 1.1107% in 2021 before settling at the current rate. Comparatively, the industry has shown a more fluctuating pattern with notable peaks and declines. OLED's relatively steady increase in dividend yield, despite recent slight drops, suggests a strong, sustained commitment to shareholder returns.

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

Explain the criterion for Universal Display (OLED) and why it is important to consider

The criterion examines the Dividend Growth Rate over a period of 20 years aiming for a rate higher than 5%. A growing dividend rate indicates robust profitability and the potential for future financial stability. It is beneficial for investors seeking consistent and increasing returns from their investments, implying a sound company financial health.

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

The payout ratio indicates the proportion of earnings a company pays out as dividends. A payout ratio below 65% suggests the company retains a large portion of earnings for growth.

The average payout ratio of Universal Display (OLED) over the last 20 years is 5.09%. This is markedly lower than the 65% threshold, indicating that the company retains the vast majority of its earnings, which can be good for growth and reinvestments. However, it's notable that before 2017, Universal Display paid no dividends, potentially showing a strategic shift in recent years.

Dividends Well Covered by Earnings?

This criterion evaluates whether a company's earnings are sufficient to cover its dividend payments. It is important because consistent, sustainable dividend payments are a sign of financial stability.

Over the years, Universal Display (OLED) shows a mixed history in terms of earnings and dividends. Up until 2012, the company did not pay any dividends and had negative earnings per share (EPS), indicating the dividends were not covered by earnings. The beginning of dividend payments in 2017 coincided with positive EPS. However, the coverage remained low initially: 0.054 in 2017 and reaching 0.270 in 2022. A well-covered dividend is typically above a ratio of 2, suggesting that Universal Display’s dividends are not robustly covered by earnings yet. The trend shows improvement, but considering the latest EPS being $0, the sustainability is questionable.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow

The Dividend Coverage Ratio is a key metric for assessing a company’s ability to sustain its dividend payments. It is calculated as Free Cash Flow divided by Dividend Payout Amount. A ratio above 1 indicates that the dividend is fully covered by the free cash flow, which is a positive signal for investors as it shows that dividend payouts are sustainable without requiring external financing. For Universal Display (OLED), the evolution of their dividend coverage ratio over the years demonstrates significant improvements, particularly in the last five years. In 2023, the ratio stands at an impressive 2.348, suggesting that Universal Display's dividends are exceptionally well-covered by cash flow. However, periods of negative free cash flow such as in 2016 should be closely monitored, as these might indicate potential risks to the sustainability of dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Explaining if the company upheld stable dividend payments over the last 20 years without dropping more than 20%

Over the past 20 years, Universal Display (OLED) initiated dividend payments starting in 2017. From 2017 onward, there has been a positive trajectory in their dividend disbursements. The dividends grew sequentially from $0.12 in 2017 to $1.40 in 2023, representing substantial and consistent growth each year. There seems to be no instance where the dividend per share dropped by more than 20%. Therefore, Universal Display demonstrates strong dividend stability, making it a favorable option for income-focused investors.

Dividends Paid for Over 25 Years?

Evaluates if the company has consistently paid dividends over a significant period, indicating long-term financial health and shareholder value prioritization.

Universal Display (OLED) has not paid dividends for over 25 years. In fact, the company only started to issue dividends in 2017. This is a relatively short period compared to companies with more established dividend histories. While their recent trend of increasing dividends is positive, the lack of a long-term dividend history might be seen as a negative aspect for investors seeking stable, long-term income through dividends. Nonetheless, the progressive increase from $0.12 in 2017 to $1.4 in 2023 showcases the company's intention to reward shareholders, assuming ongoing profitability.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Universal Display (OLED) and why it is important to consider

The number of shares of Universal Display (OLED) over the last 20 years shows fluctuations. Repurchases were particularly notable in the years 2013, 2016, and 2023. From 22428219 in 2003 to 47390352 in 2022, with 2023 showing 0. Given an average repurchase of -1.0205, indicating a net issuance rather than repurchase, Universal Display has been expanding more, suggesting a dilution effect rather than accruing shareholder value. This trend, coupled with the interpretation of historical repurchase activities, suggests a lack of consistency in reliable stock repurchases.Considering Universal Display’s behavior, it's critical to evaluate their capital allocation and shareholder return strategies, especially how their actions indicate a higher tendency to seek funding through equity issuance rather than returning capital to shareholders through repurchases. This could be seen both as an expansion strategy potentially increasing future earnings, but also as dilutive potential affecting shareholder value. Therefore, these fluctuations reflect somewhat negatively on the reliability of share repurchase programs as Universal Display’s focus seems more on growth through equity issuance.