Last update on 2024-06-27

Provident Financial Holdings (PROV) - Dividend Analysis (Final Score: 5/8)

Provident Financial Holdings (PROV) dividend deeply analyzed with 8-criteria scoring, resulting in a 5/8 score. Evaluate its performance and stability over 20 years.

Short Analysis - Dividend Score: 5

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

The dividend analysis of Provident Financial Holdings (PROV) assesses their dividend policy using eight key criteria. PROV's dividend yield of 4.4409% is higher than the industry average, suggesting a strong payout potential despite some stock price depreciation. However, the dividend growth rate has been unstable over the past 20 years, showing significant fluctuations and a recent cessation of dividend payments from 2019 to date. The company's payout ratio is healthy at 57.2%, yet it has experienced anomalies in certain years. Dividend coverage by earnings and cash flow shows variability, presenting risks for consistent dividends. Providence Financial has been paying dividends for over 20 years but not yet 25, showing a strong, though not perfect, track record. Their stock repurchase strategy has been reliable, enhancing shareholder value over the years.

Insights for Value Investors Seeking Stable Income

Given the mixed performance of Provident Financial Holdings' (PROV) dividend policy, it's important to be cautious. The high dividend yield and long dividend-paying history are attractive, but the instability in dividend growth and recent dividend cessation raise flags. For conservative, dividend-focused investors seeking stable returns, this may not be the best choice at the moment. However, the company’s prudent payout ratio and stock repurchase strategy indicate potential for future stability. It could be worth monitoring for improvements in dividend consistency and overall financial health before making an investment decision.

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 assesses the payout shareholders receive for every dollar invested. A high yield can indicate a lucrative investment.

Provident Financial Holdings' (PROV) dividend yield of 4.4409% is notably higher than the industry average of 2.76%. Over the past 20 years, PROV's dividend yield has shown substantial fluctuation, reaching as high as 8.4071% in 2008 and oscillating between 0.5525% and 4.4409% in more recent years. With yields consistently above the industry after the financial crisis, this trend underscores the company's robust dividend policy. However, a high yield could also reflect a depreciated stock price, evident from negative price changes (e.g., 30.42 in 2006 to 12.61 in 2023). Overall, this emphasizes a strong, albeit volatile, dividend payout model for investors.

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

Dividend Growth Rate over 20 years

Interpreting the Dividend Ratio data for Provident Financial Holdings (PROV), we observe the Dividend Growth Rate over the past 20 years. During this period, the company's Dividend Ratio has fluctuated significantly. The years 2003, 2004, and 2005 saw dividend per share ratio values of 199.97, 103.35, and 37.6964, respectively, indicating strong initial growth. However, in the subsequent years, there were notable declines, such as in 2008 (-47.2222%), 2009 (-78.9474%), and 2010 (-50%). Although the company experienced periods of recovery in later years, with positive dividend per share ratio values in 2011 and 2012, it was followed by continuous drops. From 2019 onward, the reported dividend per share ratio values have been zero, signaling that Provident Financial Holdings (PROV) has stopped paying dividends in recent years. With such volatility and recent zero payouts, it is evident that the compounded average over the last 20 years results in an average Dividend Ratio of 26.62, which does not sufficiently reflect consistent positive growth. Hence, while the Average Dividend Ratio might suggest a substantial figure, the discontinuation of dividends in the recent period and extreme fluctuations indicate an overall negative trend for dividend growth. Conclusively, Provident Financial Holdings (PROV) has not achieved a stable and sustained Dividend Growth Rate of over 5% in the last 20 years.

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

Average Payout Ratio

The average payout ratio for Provident Financial Holdings (PROV) over the last 20 years is approximately 57.2%. Generally, a payout ratio lower than 65% is considered healthy because it indicates that the company retains a significant portion of its earnings to reinvest in the business or to buffer against potential downturns. In this case, Provident Financial Holdings' average payout ratio satisfies the criterion, suggesting a prudent approach to dividend payments. However, the variability in yearly payout ratios, notably the exceptionally high values in 2008 (274.6%) and 2018 (202.4%), and the occurrence of a negative payout ratio in 2009 (-6.67%), reflect periods of financial distress or strategic decisions impacting dividend payout. Despite these anomalies, the trend towards a lower average payout ratio indicates financial prudence overall.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings refers to the company's ability to generate enough earnings to pay out its dividends.

Provident Financial Holdings (PROV) shows varying levels of dividend coverage by earnings over the years. In specific years such as 2009 and 2018, the coverage ratios of -0.0667 and 2.0239, respectively, indicate significant variability. A consistent coverage ratio near or above 1 is generally favorable, but the extreme fluctuation seen here might pose risks for dividend reliability. In years like 2007 and 2008 where the earnings per share (EPS) dipped drastically to $1.72 and $0.1384 while maintaining dividends, the coverages went to 0.4186 and 2.7457 indicating lower reliability. Hence, unless this trend stabilizes, it doesn't maintain a promising outlook for today's investor looking for consistent dividend returns.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means the company generates enough free cash flow to cover its dividend payments, ensuring sustainability.

Provident Financial Holdings (PROV) exhibited varying coverage of dividends by cash flow over the years. Notably negative ratios in 2003, 2005, 2009, and others suggest significant periods when free cash flow was insufficient to cover dividends. Conversely, recent trends from 2020 to 2023 show positive and improving ratios (0.541, 0.368, 0.357, 0.257), indicating better cash flow coverage of dividends. This shift to more sustainable dividend payments is a positive trend.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years

Upon reviewing the dividend per share data provided for Provident Financial Holdings (PROV) over the past two decades, several key observations stand out for income-seeking investors. During this period, PROV's dividends saw notable volatility, particularly during the financial crisis of 2008-2009. The dividend per share plummeted from $0.72 in 2007 to $0.08 in 2009, representing a major decline exceeding 20%. This significant drop indicates that PROV's dividends were severely affected during economic downturns, posing a risk for investors prioritizing stable income. Post-2010, dividends gradually increased, showing signs of recovery and stabilization. By 2012, the dividend per share rose to $0.18 and continued to incrementally rise, peaking at $0.56 from 2018 onwards. Despite early instability, the continued dividends from 2018 to 2023 at $0.56 suggest a resilient recovery. Hence, while the initial part of the two-decade span pointed to instability, the latter part demonstrates stability, a critically valuable trait for long-term income-focused investors focusing on recent past performance.

Dividends Paid for Over 25 Years?

This criterion assesses if Provident Financial Holdings has a consistent track record of paying dividends for a period of over 25 years.

Provident Financial Holdings (PROV) has been paying dividends starting from 2002. This indicates that they have a consistent track record for over 20 years. Although they don’t yet meet the 25-year threshold, this trend is promising as they are approaching that milestone. The consistency in dividend payment, especially the stable payments from 2014 to 2023, demonstrates resilience and potential for reaching the 25-year mark, which would be favorable for attracting long-term dividend investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years gives insight into a company's commitment to returning value to shareholders by reducing the number of shares outstanding, which can positively impact earnings per share (EPS). This consistency is a sign of financial health and prudent capital management.

Over the past 20 years, Provident Financial Holdings (PROV) has demonstrated a consistent stock repurchase strategy with notable year-over-year reductions in the number of shares outstanding. The total number of shares has decreased from 7,676,818 in 2003 to 7,143,273 in 2023. This represents a notable overall reduction and shows a commitment to repurchasing shares in 16 out of the 20 analyzed years. An average annual repurchase rate of 0.2747 equates to approximately a 27.47% cumulative reduction over the period. This trend is favorable, reflecting positively on the company's management policies aimed at enhancing shareholder value by minimizing dilution and steadily improving EPS through consistent stock buyback activities.