Last update on 2024-06-27

Powell Industries (POWL) - Dividend Analysis (Final Score: 5/8)

Powell Industries (POWL) Dividend Analysis with a score of 5/8 assesses performance & stability using an 8-criteria system. Insights into performance trends.

Short Analysis - Dividend Score: 5

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

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 a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. It is a crucial factor for income-focused investors and it provides insight into the company's capacity to return value to shareholders.

Powell Industries (POWL) has a current dividend yield of 1.19%, which is significantly higher than the industry average of 0.97%. This suggests that Powell Industries is more generous in returning value to its shareholders compared to its peers. Over the last 20 years, Powell Industries' dividend yield has seen substantial fluctuations, peaking at 4.1583% in 2018 and hitting a low of 0% for many years before 2013. However, it maintained relatively high yields from 2014 to 2021, before dropping closer to its current rate. The industry average has shown less volatility and higher consistency, though at generally lower levels. The higher-than-average yield can be seen as a positive sign for investors seeking income, but the historical volatility in yields indicates there may be underlying factors leading to inconsistent dividend payments.

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

The Dividend Growth Rate is the annualized percentage rate of growth of a company's dividend payments. A rate higher than 5% signifies strong and consistent growth.

Powell Industries' dividend history over the last 20 years indicates irregularities, with notable values only from 2014 and 2023 (304 and 1.1538, respectively). Given the substantial drop and the lack of consistent annual dividend payments, it's clear that Powell Industries does not exhibit a stable dividend growth rate, let alone one higher than 5%. Although there is an isolated high value in 2014, the inconsistency precludes a positive trend for sustainable dividend growth. This irregular trend is generally viewed unfavorably, as it suggests instability in earnings or a strategic decision to withhold dividends in most years, which may concern potential investors focused on reliable dividend income.

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

Explain the importance of having an average payout ratio lower than 65%.

A lower payout ratio generally indicates that a company is retaining more of its earnings to reinvest in its core business operations or to weather economic downturns. Companies with payout ratios consistently below 65% often have greater financial flexibility and are considered less risky investments because they are less likely to cut dividends in lean years.

Dividends Well Covered by Earnings?

The criterion assesses if a company's earnings per share (EPS) sufficiently cover its dividend payments to ensure sustainable dividends.

Examining Powell Industries' Earnings Per Share (EPS) and Dividends Per Share (DPS), we observe several key points within the given dataset. EPS has seen significant variability over the years, from a high of $4.59 in 2023 to a negative EPS during years like 2011 and 2017. Meanwhile, the DPS remained constant at $1.04 from 2015 to 2020, a sign of commitment to returning value to shareholders even during weak earnings periods. The 'Dividends covered by EPS' ratio, a crucial metric, indicates that during certain years (e.g., 2013 with 0.071), EPS hardly covered the dividends. This ratio even turned negative during loss-making years, such as 2017, reflecting inability to cover dividends using current earnings. However, the substantial EPS observed in 2023 and the corresponding improvement in dividend coverage (0.229) are favorable outcomes. Despite variations, a consistent dividend payout reflects management's long-term view on returning value to shareholders, but recent improvements in EPS are positive for its future coverage sustainability. Thus, ongoing EPS volatility raises concerns but recent trends appear encouraging if sustained.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that a company's free cash flow is sufficient to pay out its dividends. This ensures the dividend is sustainable.

For Powell Industries (POWL), examining the relationship between free cash flow (FCF) and dividend payout from 2003 to 2023 reveals some important trends. For many years in the early 2000s, no dividends were paid, implying all cash flow was retained within the company for reinvestment or other uses. Beginning in 2014, the company initiated regular dividend payments. However, data on dividend coverage shows significant variance and occasional negative coverage ratios. Specifically, the negative coverage ratios in years like 2014 (-1.63), 2015 (-0.57), 2018 (-0.36), 2021 (-2.03) indicate that dividends were not well supported by the company’s free cash flow in those periods. This can be risky as it may reflect borrowing or drawing from reserves to cover dividend payouts, which may not be sustainable. On the positive side, 2023 shows a coverage ratio of 0.071, a noticeable improvement. Despite fluctuations, years with positive dividend coverage like 2016 (0.165), 2017 (0.358), 2019 (0.186), and 2020 (0.179) highlight POWL’s commitment to balancing FCF and dividend obligations. Overall, while there are years of concern, trends suggest efforts towards better alignment in recent years, which is a good sign but continues monitoring is crucial.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

From 2003 to 2023, Powell Industries only started paying dividends in 2013, beginning with a dividend of $0.25 per share. The dividends gradually increased and stabilized at $1.01 per share from 2014 onwards, with a slight increase to $1.052 in 2023. Notably, there were no years where the dividend per share dropped by more than 20%, meeting the criterion for stability—a critical factor for income-seeking investors looking for reliable returns.

Dividends Paid for Over 25 Years?

Explain the criterion for Powell Industries (POWL) and why it is important to consider

Dividends Paid for Over 25 Years?: One critical factor for income-seeking investors is whether a company has a long-standing history of dividend payments. Consistent dividends demonstrate financial stability and a commitment to returning value to shareholders. A history of over 25 years of dividend payments showcases the company's resilience through various economic cycles and enhances investor confidence.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's commitment to returning value to shareholders and managing outstanding shares. It’s a key indicator of financial health and shareholder-friendly policies.

Over the past 20 years, Powell Industries has displayed intermittent stock repurchase activity, as evidenced by the slight reductions in the number of shares during 2006 (dropping to 10,779,000) and the more noteworthy dips in 2015 and 2016 (down to 11,431,000 and then 11,453,000). However, this sporadic activity doesn't signify a robust or committed buyback strategy. The overall trend shows a gradual increase in shares from 10,681,000 in 2003 to 11,879,000 in 2023, despite the average repurchase of 0.5485. This indicates the buyback efforts were neither consistent nor substantial enough to offset new issuances or other factors causing share dilution. Hence, in terms of reliable stock repurchase trends, Powell Industries doesn't show a strong commitment, and this could be seen as a negative from the perspective of shareholders looking for regular buyback programs to boost share value.