Last update on 2024-06-27

Kering (PPX.DE) - Dividend Analysis (Final Score: 5/8)

Comprehensive dividend analysis of Kering (PPX.DE), focusing on stability, performance, and payout sustainability based on an 8-criteria scoring system.

Short Analysis - Dividend Score: 5

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

The analysis of Kering (PPX.DE)'s dividend policy based on an 8-criteria scoring system yields a score of 5 out of 8, indicating a mixed performance.

Insights for Value Investors Seeking Stable Income

Kering (PPX.DE) shows strong dividend yields and a commendable average dividend growth rate but fails to maintain a stable payout ratio and consistent dividend coverage. The company has a robust history of returning value to shareholders through buybacks and has shown resilience in maintaining dividend stability despite market fluctuations. However, the inconsistency in payouts and coverage indicates potential financial strain. Investors looking for stable income might need to scrutinize Kering's financial health further, but those willing to take on some risk for potentially higher returns may find Kering worth considering.

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 per share of a company compared to its stock price. A higher dividend yield compared to the industry average indicates that a company is returning a significant portion of its profits to shareholders. It also can signal the financial health and profitability of the company.

Kering's dividend yield stands at 3.4965%, which is significantly higher than the industry average of 2.5%. Over the last twenty years, Kering's dividend yield has shown variability, highlighting years with much higher-than-average yields, such as in 2008 (8.0717%) and in 2023 (3.4965%). This suggests that Kering is committed to providing substantial returns to its shareholders relative to its industry peers. However, the dividend yield also inversely relates to its fluctuating stock price, which has seen a general upward trend, peaking at over €700 in 2021 from just over €100 in 2007. While a high dividend yield is generally positive, it is crucial to assess the sustainability of such yields in the context of the company's profitability and market conditions.

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

The Dividend Growth Rate measures the annualized percentage rate of growth in dividends over a specific period, and a rate higher than 5% is generally considered attractive to investors looking for income growth.

Examining Kering (PPX.DE)'s dividend growth rate over the past 20 years, we observe significant fluctuations with inconsistent payouts. For instance, some years experience exponential growth such as 2019 with 75%, while others show no dividends at all or even negative growth rates like 2009 with -4.3478%. The average dividend growth rate stands at approximately 9.76%, which is over the desirable 5% threshold. However, the inconsistency and presence of negative growth in some years introduce volatility that may be concerning for risk-averse investors. Despite a promising average, the reliability of this growth is questionable.

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

The payout ratio indicates the percentage of earnings distributed to shareholders as dividends. A lower average payout ratio suggests the company retains more earnings for growth or debt reduction.

For Kering (PPX.DE), the analysis of the payout ratio over the past 20 years reveals concerning trends. The average payout ratio stands at approximately 81.73%, substantially exceeding the recommended threshold of 65%. Throughout these years, the payout ratio has shown wide fluctuations. For instance, in 2013, the ratio skyrocketed to 952.74%, likely due to a year of exceptionally low earnings. Such variability raises questions about the company's profit stability and long-term dividend sustainability. While there were more favorable years, such as 2018 with a ratio of 20.34%, the inconsistency and high average indicate potential financial strain. Overall, this trend of having a high average payout ratio is unfavorable for dividend stability.

Dividends Well Covered by Earnings?

The dividend coverage ratio, which compares earnings per share (EPS) to dividends per share (DPS), is a key metric for assessing the sustainability of dividends. A ratio above 1 suggests that earnings are sufficient to cover dividend payments, ensuring financial stability and indicating a lower risk of dividend cuts.

Analyzing the dividend coverage ratio for Kering (PPX.DE) from 2008 to 2023 reveals a varied trend. For instance, from 2008 to 2012, the ratios remain below 1, suggesting insufficient earnings to cover dividends. In 2013, there's an unusual spike (9.53), likely due to an anomaly in earnings. Post-2014, the coverage ratio stabilizes around values close to 1 or exceeding it, signaling better dividend coverage. The trend improves significantly from 2016 onward, reaching above 0.5 in most years and even hitting 0.93 in 2020. However, the lower ratios in 2017 (0.32) and 2019 (0.313) still indicate short-term earnings strain. Overall, the improving ratios suggest an upward trajectory in financial health regarding dividend sustainability.

Dividends Well Covered by Cash Flow?

Explain why it is important for Kering's dividend to be well covered by its free cash flow.

Assessing the degree to which Kering's dividend payments are covered by its free cash flow is crucial for understanding its dividend sustainability and financial health. Free cash flow represents the cash a company generates after accounting for capital expenditures, and it is a key indicator of the funds available to return to shareholders through dividends. If dividends are consistently covered by free cash flow, it suggests that the company is not over-leveraging its financial position to reward shareholders. This stability is particularly valued by long-term investors who seek reliable income streams. Kering's free cash flow has fluctuated over the years, showing patterns of growth interspersed with occasional declines. The company's dividend payouts have generally increased over the years. From 2003 onward, Kering’s free cash flow ranged from €309.9M to €3.94B, while dividends increased from €266.7M to €1.712B. A specific dividend coverage ratio can reveal how comfortably payouts are made from operational cash. There was noticeable variability in coverage ratios, such as a low of 0.25 in certain years, indicating potential constraints, versus a high of 0.92 in more favorable periods. Overall, consistent coverage above 1 would be ideal, but Kering’s recent figures suggest prudent, if occasionally strained, cash management for dividends. Thus, Kering has room to improve in establishing stable, predictable dividend coverage.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends mean consistent returns to investors. A drop of more than 20% could indicate fiscal issues, causing concern.

Kering (PPX.DE) has shown a commendable stability in its dividend payments over the past 20 years. Examining the provided data, from the year 2008 onwards until 2023, the dividends per share have been largely consistent and increasing. It's noteworthy that despite the financial crisis and global disruptions, Kering's dividend per share didn’t drop over 20% in any given year. For example, in 2021, the dividend per share was €16, and in 2022, it slightly decreased to €8, but in 2023 it rose again to €12. This indicates resilience and a recovery strategy. Overall, Kering’s ability to sustain dividends and avoid any drastic drop showcases robust financial health and strong management, which makes it a reliable option for income-seeking investors.

Dividends Paid for Over 25 Years?

Explain the criterion for Kering (PPX.DE) and why it is important to consider

The data provided indicates that Kering began paying dividends in 2008. Since then, they have consistently paid dividends every year, though the amounts have varied. The importance of this criterion lies in the financial stability and shareholder value it reflects. A company that has paid dividends for over 25 years is often seen as financially stable and reliable. This can attract long-term investors who value consistent returns. However, Kering does not meet this criterion as they have paid dividends for 15 years. While this is a good indicator of stability, without the full 25-year history, it doesn't offer the same level of assurance.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years?

Kering (PPX.DE) has systematically implemented stock repurchase programs over the past two decades, with a noticeable pattern of reducing the number of outstanding shares in multiple years. An average repurchase ratio of -0.3023 indicates that the company has had a consistent strategy of buying back shares, leading to a decrease in shares from 131,082,468 in 2003 to 122,354,389 in 2023. This trend reflects the company's commitment to returning value to shareholders, often through buybacks when they believe the stock is undervalued or to improve financial ratios. Such a decrease in outstanding shares can potentially increase the Earnings Per Share (EPS) and signal the management's confidence in the company's future prospects.