Last update on 2024-06-27

Parker Hannifin (PH) - Dividend Analysis (Final Score: 7/8)

Detailed dividend analysis of Parker Hannifin (PH) using an 8-criteria scoring system, achieving a final score of 7/8. Essentials for investors.

Short Analysis - Dividend Score: 7

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

Here's the lowdown on Parker Hannifin (PH) based on an 8-criteria scoring system that checks how well they handle dividends. Their overall score is 7 out of 8. First off, their dividend yield is slightly lower than the industry average—1.2524% compared to 1.57%. Even though this may turn off some yield-focused investors, it's worth noting PH's stock price has mostly gone up, suggesting they focus on both share price growth and dividends. Their Dividend Growth Rate is above 5%, hitting an average of 12.86%, but it has been quite volatile with some years seeing zero dividends. Their average payout ratio of 30.41% shows they're careful about balancing profits and giving money back to shareholders. PH's Earnings per Share (EPS) has grown impressively ($1.12 in 2003 to $16.23 in 2023) and their dividends are well-covered by their earnings and free cash flow, showing sound financial management. Stability-wise, their dividends have grown steadily over the past 20 years from $0.51 to $5.77 and they've been paying out for 26 years straight. They've also been good about buying back shares, which boosts EPS and reflects confidence in their growth.

Insights for Value Investors Seeking Stable Income

Parker Hannifin seems solid overall, especially with their disciplined payout ratio and reliable earnings growth. If you're an investor who values consistent dividend payments and company stability, they might be worth considering. Just keep in mind that while their dividend yield is lower than the industry average, their balanced focus on both dividends and stock price growth might compensate for that. Also, pay attention to the historical volatility in their dividends if consistency is important to you.

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 and why it's important to consider

The dividend yield of Parker Hannifin stands at 1.2524%, which is lower than the industry average of 1.57%. Over the last 20 years, Parker Hannifin’s dividend yield has fluctuated, hitting a high of 2.5985% in 2015 and a low of 1.0035% in 2004. The lower-than-average yield indicates that Parker Hannifin may not be the most attractive option for yield-seeking investors. The closing stock price has generally been on an upward trend, closing at $460.7 in 2023 from $39.67 in 2003. Along with increasing dividends per share which rose to $5.77 in 2023 from $0.51 in 2003, this suggests that the company is more focused on a balanced approach between price appreciation and dividend payments. Despite being lower than the industry, continuous growth in DPS shows commitment to returning value to shareholders.

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

Dividend Growth Rate measures the annualized percentage rate of growth of a company’s dividend. A rate higher than 5% is often linked with companies experiencing solid, consistent growth. Sustained dividend growth can signify a company's strong earnings and financial health, and it's essential for determining a stock's potential return on investment over time.

The data provided shows significant irregularity in the Dividend Ratio of Parker Hannifin over the past two decades. We see values ranging from as low as 0 to as high as 33.6449%. The extremely volatile dividend payouts with several years marked by zero dividend payments (2004, 2016) raise concerns about the consistency of Parker Hannifin's financial health. On the surface, the average dividend ratio of 12.86% seems favorable, significantly exceeding the 5% criterion. However, this average may mask the underlying volatility as consistently high growth rates in dividends should ideally show less year-to-year fluctuation. It is advisable for potential investors to look beyond the average and scrutinize the year-over-year stability before drawing conclusions about the strength and reliability of future dividend payments from Parker Hannifin.

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

Explain the criterion for Parker Hannifin (PH) and why it is important to consider

The average payout ratio lower than 65% in the last 20 years measures the proportion of earnings Parker Hannifin pays to its shareholders in the form of dividends. A ratio below 65% is generally considered healthy as it suggests that the company retains enough earnings for growth and stability. Parker Hannifin has an average payout ratio of 30.41% over the last 20 years, indicating a disciplined approach in balancing rewarding shareholders and reinvesting earnings. This trend is favorable for the company and its investors.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings indicate a company's ability to sustain its dividend payouts. A higher coverage ratio is typically more favorable.

The Earnings per Share (EPS) of Parker Hannifin (PH) has shown significant growth over the past two decades, rising from $1.12 in 2003 to $16.23 in 2023. The steady increase in EPS highlights the company's strength and performance over time. When comparing these figures to the Dividends per Share (DPS), which also saw consistent growth from $0.51 in 2003 to $5.77 in 2023, it's clear that Parker Hannifin has maintained a solid balance between rewarding its shareholders and retaining earnings for sustained growth. The dividends covered by earnings ratio (DPS/EPS) fluctuated from a low of about 0.17 in the mid-2000s to a commendable 0.49 in 2022, indicating that the company's earnings were often more than sufficient to cover its dividend payouts. This strong coverage ratio underscores Parker Hannifin's prudent financial management and its potential to continue delivering value to shareholders. The trend in recent years appears particularly favorable, reflecting robust financial health. Thus, this trend in dividends being well covered by earnings is a good indicator of Parker Hannifin's stable and sustainable dividend policy.

Dividends Well Covered by Cash Flow?

This criterion assesses if the company's dividend payout is supported by its free cash flow. Ensuring dividends are well-covered by cash flow indicates financial health and sustainability.

Analyzing Parker Hannifin's historical free cash flow and dividend payout from 2003 to 2023, we observe a solid trend. The ratio of dividend payout to free cash flow has ranged from 0.13 to 0.34. Specifically, in 2023, the ratio is 0.27, suggesting that Parker Hannifin used about 27% of its free cash flow to pay dividends. This fairly conservative payout ratio indicates that the company has retained ample cash flow for reinvestment or to buffer against financial downturns. Variability over the years hints at prudent financial management, adjusting dividend payouts based on cash flow availability. Overall, this trend is favorable, indicating a healthy balance between rewarding shareholders and maintaining financial flexibility.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate that a company can reliably generate consistent cash flow. This stability is crucial for income-focused investors, as it ensures a predictable income stream.

Upon examining Parker Hannifin's dividend per share data over the past 20 years, the company demonstrated a steady upward trend in dividend payouts. Starting from $0.5067 in 2003 and reaching $5.77 in 2023, there were no instances of the dividend per share dropping by more than 20%. This consistent growth signifies a robust financial health and commitment to returning value to shareholders, which is highly positive for long-term income-seeking investors.

Dividends Paid for Over 25 Years?

Analysis of whether Parker Hannifin has paid dividends for over 25 years and why this criterion is critical for investors.

The data underscores that Parker Hannifin has consistently paid dividends for the last 26 years, from 1998 to 2023. In 1998, the dividend per share stood at $0.40, increasing progressively to $5.77 in 2023. This long-term consistency in dividend payments is pivotal as it demonstrates the company's financial health, stability, and commitment to returning value to shareholders. A track record of over 25 years of dividend payments often signals a reliable and mature company. This trend is favorable and instills confidence in potential investors about the company's ability to generate steady cash flows and sustain dividend payouts.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Parker Hannifin (PH) and why it is important to consider

The analysis of stock repurchases over a period of time is a significant measure of a company's commitment to return value to its shareholders. It is important because consistent and reliable stock repurchases can indicate a company's robust financial health and confidence in its own future growth. On average, a reduction in the number of shares outstanding could lead to an increase in earnings per share (EPS), benefiting shareholders.