Last update on 2024-06-27

Puma (PUM.DE) - Dividend Analysis (Final Score: 5/8)

Analyze the stability and performance of Puma (PUM.DE)'s dividend policy using an 8-criteria scoring system, achieving a score of 5 out of 8.

Short Analysis - Dividend Score: 5

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

Puma's dividend yield of 1.6231% is higher than the industry average but has been highly volatile in the last 20 years. The average annual dividend growth rate is 98.05%, showing significant spikes rather than stable growth. The payout ratio averages 174%, well above the sustainable 65% threshold, indicating an unsustainable payout level. Dividend coverage by earnings and free cash flow has also been inconsistent. Puma has not maintained stable dividends over the long term, with periods of no payments since 2003. Stock repurchases have been sporadic but generally positive, decreasing total shares from 2003 to 2023, though not recently active.

Insights for Value Investors Seeking Stable Income

Puma's current dividend yield and recent improvements are positive, but the instability in growth rate, high payout ratio, and inconsistent dividend coverage raise red flags. The lack of stable, long-term dividends and recent inactivity in share repurchase programs suggest that conservative, income-focused investors might be cautious. However, those looking for potential capital appreciation might find its recent steps toward improvement worth watching. Overall, Puma may require closer scrutiny and perhaps isn't the best choice for those seeking stable, reliable dividends.

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 represents the ratio of a company's annual dividend compared to its share price and is a measure of the income generated by the investment relative to its cost.

Puma's current dividend yield of 1.6231% surpasses the industry average of 1.11%, indicating a relatively higher income potential for investors compared to similar companies. Historically, Puma's dividend yield has shown significant volatility over the last 20 years, with values ranging from 0.1488% to 19.6009%. This inconsistency may indicate varying profitability and payout policies. Notably, in recent years, Puma's dividend yield has been markedly lower than its historical peaks, such as 2020's 0.5418% and 2021's 0.1488%, but has shown improvement to reach 1.6231% in 2023. When juxtaposed against the industry's fairly stable average, Puma's higher current yield is favorable, yet the historical volatility warrants cautious optimism. The recent improvement suggests a positive trend, but the sustainability of this trend, given past fluctuations, remains uncertain. The closing stock prices also depict a relative increase over the years, which may influence the dividend yield's attractiveness to investors, balancing between capital appreciation and income generation.

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

Examining the dividend growth rate over an extended period, such as the last 20 years, helps investors understand the stability and growth potential of the company's dividend payments. A growth rate higher than 5% is often considered positive and indicative of a company's robust financial health.

Based on the data provided for Puma (PUM.DE), the dividend growth rate has shown significant volatility over the past 20 years. With values oscillating between highly positive and negative percentages, it indicates inconsistent dividend policy and possible influences from external economic factors or company-specific challenges. Although the average dividend growth rate is calculated at 98.05%, this figure is substantially skewed by occasional high growth spikes rather than representing steady, reliable growth. More specifically, notable spikes such as 1566.66% in 2019 likely stem from one-off occurrences rather than sustainable growth. Given this context, while there are periods of growth that exceed the 5% benchmark, the inconsistency suggests a lack of stable upward trend in dividends. This fluctuating growth rate may be viewed unfavorably by income-focused investors seeking reliable and predictable dividend income, thus painting a rather erratic picture for Puma’s dividend reliability. Overall, while there are moments of high growth, the erratic nature ultimately may portray a higher risk concerning dividend stability.

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

The average payout ratio indicates how much of the company's earnings are returned to shareholders in the form of dividends. A ratio lower than 65% is generally preferable as it suggests the company retains enough income to reinvest in its growth while also rewarding shareholders.

The average payout ratio of 174% over the last 20 years is significantly above the 65% threshold and this is clearly not a positive indicator. A high average payout ratio suggests that Puma has often paid out more in dividends than it earned, which is unsustainable over the long term. Short term spikes, such as the extremely high payout ratios in 2012 (426.4392%) and 2013 (1408.4507%), showcase periods of financial strain where the company had to dip into reserves or even take on debt to meet dividend commitments. Such practices can hamper the firm's ability to invest in expansion, R&D, and other growth initiatives. Although recent years show a more managed payout ratio, maintaining a sustainably low payout ratio is crucial for the firm’s financial health. Additional investor scrutiny might be required on these periods of extremely high payout ratios to understand their impact in the company’s strategic financial planning.

Dividends Well Covered by Earnings?

Explain the criterion for Puma (PUM.DE) and why it is important to consider

Dividends are typically a portion of earnings paid out to shareholders. Therefore, it's crucial that Puma's earnings sufficiently cover their dividend payments to ensure sustainability. If dividends paid are consistently higher than earnings, it puts financial strain on the company.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is a key metric that shows if a company generates sufficient free cash flow to cover its dividend payments. It highlights financial health, sustainability of dividends, and attractiveness to dividend-seeking investors.

Puma's ability to cover its dividends with free cash flow has been highly inconsistent over the years. Starting from a robust coverage of 0.063 in 2003, there were years like 2004 and 2005 where no dividends were paid, so the coverage is 0. In 2008, there was a sharp decline to a coverage ratio of 0.425, and the situation worsened during 2009 (0.162) and picked up slightly in 2010 (0.237). However, the climax can be seen in 2018 with an excellent coverage of 1.263, showing that free cash flow vastly exceeded dividend payouts during that year. Despite this peak, the ratios significantly dropped in subsequent years, with 2019 showing only 0.158 coverage followed by a slight improvement to 0.347 in 2023. These fluctuations indicate an underlying volatility in Puma’s free cash flow relative to its dividend obligations. This trend is not particularly favorable for conservative dividend investors who value stability.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Puma (PUM.DE) and why it is important to consider

Stable dividend payments over a span of two decades signify long-term reliability and financial health. If the dividend per share does not drop by more than 20%, it indicates that the company can sustain its payouts through various economic cycles, which is attractive to income-seeking investors.

Dividends Paid for Over 25 Years?

Track record of paying dividends for over 25 years indicates stability and reliability, attracting long-term investors.

Puma has not paid dividends consistently over the past 25 years. Their dividend history starts from 2003 with inconsistent payments, including periods of no dividends (e.g., 1998-2002, 2020). Despite having some relatively high distributions in certain years, such as 2006 or 2007, the lack of continuity and some zeros show it has not maintained a consistent trend. This inconsistency can deter long-term, income-focused investors who seek reliable dividend stocks. Therefore, the trend is not favorable when evaluated against a criterion of stable dividend payments over 25 years.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases involve buying back shares from the marketplace, reducing the number of outstanding shares, which can increase the value of remaining shares and earnings per share. Analyzing stock repurchases over a long period can signal management's confidence in the company's future and sound capital allocation strategy.

Over the past 20 years, Puma (PUM.DE) has had noticeable share repurchases in specific years including 2006, 2007, 2008, 2009, 2011, 2012, 2013, and 2014. The overall trend shows a decrease in the number of shares from 2003 to 2023, dropping from 164,490,000 in 2003 to 149,852,251 in 2023. This suggests that the company has been actively managing its share count, most likely through repurchase programs. The average repurchased rate of -0.4538 is a positive indicator as it reflects the company's long-term commitment to increasing shareholder value by reducing shares outstanding. Such buybacks also conform to market practices, reflecting prudent capital management and potentially leading to higher share value over time. However, significant repurchases haven't been observed in the more recent years, hinting that the company's focus might have shifted towards other strategic investments or capital requirements.