Last update on 2024-06-27

Progressive (PGR) - Dividend Analysis (Final Score: 5/8)

In-depth dividend analysis of Progressive (PGR) using an 8-criteria system. Discover the performance and stability of PGR's dividend policy with a final score of 5/8.

Short Analysis - Dividend Score: 5

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

To evaluate Progressive's (PGR) dividend performance and stability, an 8-criteria scoring system was used, resulting in a score of 5. The analysis showed that Progressive's dividend yield significantly lags behind the industry average, with substantial fluctuations over the past 20 years. The dividend growth rate has been inconsistent, and while the average payout ratio has remained below 65%, demonstrating sustainability, the coverage of dividends by earnings fluctuated. Similarly, the cash flow coverage and dividend stability revealed notable volatility, albeit with consistent payouts for over 25 years. The stock repurchase history was mostly favorable, minus some interruptions.

Insights for Value Investors Seeking Stable Income

While Progressive shows good signs in terms of payout ratio and a long history of dividend payments, the inconsistency in dividend yield and growth rate, along with volatility in earnings and cash flows, presents risks. Investors looking for stable and consistent income might find better alternatives. However, those interested in capital gains and longer-term growth might consider Progressive, given its rising stock prices and history of share repurchases.

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 ratio of a company's annual dividend compared to its share price. It reflects the return an investor receives in the form of dividends for every dollar invested in the company's stock. A higher dividend yield can indicate a good return on investment. However, extremely high or low yields could indicate potential risks or undervaluation.

Progressive's current dividend yield of 0.2511% significantly underperforms the industry average of 2.47%. Analyzing the historical data, the dividend yield has shown extreme fluctuations over the past two decades, with highs like 10.4384% in 2007 and lows including several years with no dividends at all. The most recent trend shows a considerable decline from 6.2348% in 2021 to 0.2511% in 2023. Meanwhile, Progressive's stock price has seen a robust increase, closing at $159.28 in 2023, up from $20.8975 in 2003. The declining dividend yield combined with a rising stock price suggests that while the company’s share price has appreciated, its dividend payouts have not kept pace with this growth. Investors looking for consistent dividend income might find Progressive less appealing compared to other industry opportunities. However, those focused on capital gains might find the appreciating stock price attractive.

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

The Dividend Growth Rate evaluates the annualized percentage rate of growth of a company's dividend over a specific period, typically assessed over 5, 10, or 20 years.

Progressive (PGR)'s dividend per share ratio over the past 20 years shows significant volatility, with substantial positive and negative swings. Notably, the average dividend ratio is calculated at around 199.09%, which seems skewed due to high peaks like 3503.60% in 2007 and drastic negatives like -100% in 2008. This variability indicates inconsistent dividend growth. The year-over-year growth rate shows inconsistency; thus, evaluating the overall trend and stability is challenging. While there were years of substantial dividend growth, the broader picture is of inconsistency, transitioning from strong increases to sharp declines. For investors seeking steady and reliable dividend growth, this trend can be seen as risky.

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

This ratio indicates the proportion of earnings paid out as dividends to shareholders, revealing how much profit is retained for reinvestment. A lower ratio suggests sustainable dividends.

Over the past 20 years, Progressive's average payout ratio is approximately 29.28%, which is well below the 65% threshold. Despite some fluctuations, including occasional spikes due to exceptional circumstances (e.g., 2007 and 2021), the overall trend is favorable. Such a low payout ratio indicates a good balance between rewarding shareholders and retaining earnings for future investments, suggesting that Progressive's dividend payments have been sustainable and that the company maintains ample reserves for growth and contingency planning.

Dividends Well Covered by Earnings?

Explain the criterion for Progressive (PGR) and why it is important to consider

This metric evaluates if a company's earnings sufficiently cover its dividend payments. This measurement is vital because a sustainable dividend coverage ratio signals financial health and promises there likely won't be cuts to payouts. For Progressive (PGR), the Earnings per Share (EPS) ranged from -0.1039 to 9.7531 over the mentioned period, demonstrating significant fluctuations. However, the dividend per share displayed less variability but did experience significant increases during good EPS years, particularly between 2019 and 2023. Starting from 2003, PGR's dividend was well covered, except in 2008 and a few other years where dividends froze or were cut. Moreover, except for 2007 and 2021 where the EPS wasn't negatively impacted, other years recorded a more than comfortable margin, contributing positively to attractive and sustainable dividends. Overall, Progressive shows that its earnings have reliably covered dividends, reinforcing investor confidence.

Dividends Well Covered by Cash Flow?

Explain the criterion for Progressive (PGR) and why it is important to consider.

Dividend coverage by free cash flow (FCF) is a critical measure of a company's ability to maintain payouts to shareholders. It is a key indicator of dividend sustainability. When dividends are well covered by FCF, it implies the company generates sufficient cash to meet its dividend obligations, signifying financial health.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Progressive (PGR) and why it is important to consider

The stability of dividends is a critical aspect for investors, primarily those seeking steady income from their investments. Progressive's (PGR) dividends over the past 20 years show notable fluctuations. In 2009, the company paid no dividends, and in other years such as 2007 and 2021, the dividends dropped significantly. In 2007, the dividend increased substantially compared to 2006 but sharply plummeted in 2008. Yet, steep increases were also observed in some years like 2007 and 2021 with dividends of $2.00 and $6.40 respectively. This pattern highlights that dividend stability is lacking in Progressive's (PGR) case, marking it as a riskier option for income-seeking investors. An evaluation of such trends clearly demonstrates inconsistency.

Dividends Paid for Over 25 Years?

Determining if Progressive has paid dividends for over 25 years showcases the company's commitment to returning value to shareholders. Consistent dividend payment history also implies financial stability and can signal positive future prospects.

Progressive (PGR) has indeed paid dividends consistently over the last 25 years, from 1998 to 2023. In observing the data, the annual dividend per share grew from $0.0208 in 1998 to a higher value despite some fluctuations. Such a historic consistency is a strong indicator of Progressive's long-term financial health and commitment to shareholder returns. However, it's important to note some gaps, such as in 2009 when no dividend was paid, though generally, this trend is overwhelmingly positive for current and prospective investors. Overall, this is a good sign for the criterion of having a long dividend payment history.

Reliable Stock Repurchases Over the Past 20 Years?

Criterion of Reliable Stock Repurchases Over the Past 20 Years refers to a company's consistency in buying back its shares over a prolonged period.

Progressive has consistently repurchased its shares from 2004 to 2016 and in 2019, 2021, and 2022. The number of shares outstanding decreased from 882 million in 2003 to around 584 million in recent years. The significance of this repurchase trend is that it generally signals management's confidence in the company's future prospects and indicates excess cash flow that is being returned to shareholders. Considering the average share repurchase reduction rate of 1.9956%, this trend can be viewed positively, given that it enhances shareholder value by reducing the number of shares outstanding and subsequently increasing earnings per share (EPS). However, occasional years without repurchase should not be overlooked as they could indicate strategic financial decisions in those periods.