Last update on 2024-06-27

Quanta Services (PWR) - Dividend Analysis (Final Score: 5/8)

Discover Quanta Services (PWR) dividend analysis with a final score of 5/8 based on 8-criteria. Evaluate its performance, stability, and growth potential.

Short Analysis - Dividend Score: 5

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

Quanta Services (PWR) gets a mid-range dividend score of 5 out of 8 criteria in our analysis of its dividend policy. The company has a current dividend yield of 0.1529%, which is much lower than the industry average of 2.27%. PWR's dividend policy started in 2018 and has been variable but shows a general upward trend. The dividend growth rate averages 20.28%, indicating potential but also inconsistency. PWR's payout ratio is impressively low at an average of 1.77%, showing sustainable and prudent financial management. The earnings per share (EPS) have increased significantly from 2003 to 2023, suggesting growing profitability. Free cash flow to dividend payout ratios started positive from 2012 onwards but have seen a recent decline. PWR began consistently paying dividends in 2016, showing modest growth with a slight decrease in 2023, but this payment history doesn't long predate the company's quarter-century tenure. Stock repurchase records are mixed but have been more reliable in the last decade, suggesting a focus on returning value to shareholders.

Insights for Value Investors Seeking Stable Income

Considering all points, Quanta Services (PWR) may not be the best option if you're an income-focused investor looking for consistent and high dividend returns due to its lower yield and limited dividend history. However, if you are a growth-oriented investor, PWR's strong EPS growth, low payout ratio, and solid financial management present it as a compelling option. The reliable stock repurchase activity in recent years also adds to its attractiveness for those who prioritize capital appreciation.

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

Quanta Service's (PWR) current dividend yield stands at 0.1529%, which is significantly lower than the industry's average of 2.27%. Over the last 20 years, PWR initiated its dividend policy only in 2018, marking its first yield at 0.1329%. Since then, the yield has shown variability, starting at 0.1329% in 2018, peaking at 0.4176% in 2019, and subsequently decreasing to its current level of 0.1529%. Compared to the relatively higher industry average, the company’s lower yield suggests a focus on reinvesting earnings rather than distributing them to shareholders. Furthermore, rapidly increasing stock prices, closing at $215.8 in 2023 from $7.3 in 2003, indicate significant capital appreciation, possibly justifying the firm's lower dividend policies. Generally, for income-focused investors, PWR might not be attractive due to its lower yields, however, it might appeal to growth-centric investors. This trend is a mixed signal; it is good for investors focusing on capital growth but less so for those who rely on steady dividend income.

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

The Dividend Growth Rate is higher than 5% in the last 20 years and why it is important to consider

Over the past 20 years, Quanta Services (PWR)'s Dividend Growth Rate shows significant variability. Although the company began issuing dividends in 2019, the growth rate fluctuated drastically, showing a dramatic increase of 325% in the first year and subsequent declines in the following years. The average dividend growth rate stands at 20.28%, which is substantially high but also indicative of volatility. This trend suggests the company's dividend policy is relatively new and inconsistent at this stage. This inconsistency might be a cause for concern for conservative investors seeking stable dividend income, although the high average growth presents opportunities for growth-oriented investors.

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

Average Payout Ratio lower than 65% in the last 20 years is crucial to ensure the company's dividends are sustainable and not overly burdensome on its earnings, indicating financial health.

Quanta Services (PWR) has demonstrated a consistently low payout ratio over the last 20 years, averaging at 1.77%, with recent years never exceeding 10.52%. This is significantly below the 65% threshold, affirming the company's strong ability to sustain its dividend payouts without compromising its financial stability. Such a conservative payout ratio reflects prudent management and reinforces confidence in the company’s long-term commitment to returning value to shareholders.

Dividends Well Covered by Earnings?

Earnings per share indicates the portion of a company's profit allocated to each outstanding share of common stock, representing a measure of profitability.

Examining Quanta Services (PWR) EPS history from 2003 to 2023, a significant upward trend can be observed, most notably from 2019 to 2023 where EPS increased from $2.75 to $5.12. This consistent rise in EPS over the years indicates growing profitability, which is favorable. However, note the decrease in 2003 (-$0.32) and later fluctuations, showing initial instability. Generally, the recent upward trend signifies a robust and improving financial performance.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow considers if a company's free cash flow is sufficient to pay dividends. This is important because it ensures the company can sustain or grow its dividend payments without borrowing or cutting essential spending.

From 2003 to 2010, Quanta Services (PWR) did not pay dividends. Starting in 2012, their free cash flow to dividend payout ratio became positive. Despite a dip to -0.171 in 2012, the subsequent ratio from 2013 onwards remained positive, peaking at 1.586 in 2014. However, recent years show a decline, with the ratio hovering between 0.041 and 0.173, suggesting less robust coverage. While this trend is better than early years without dividends, the decrease in coverage since 2014 warrants attention as it may signify possible constraints in consistently covering dividends without impacting reinvestment or other financial activities.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividend payments reflect the company's solid financial health and its commitment to returning capital to shareholders.

Over the past 20 years, Quanta Services (PWR) began paying dividends only starting in 2016. The dividend per share showed an increasing trend from $0.04 in 2016 to $0.36 in 2022, reflecting a growing commitment to returning capital to shareholders. However, in 2023, the dividend per share dropped to $0.33 from $0.36 in 2022, representing a decline of 8.3%, which is still within the acceptable range (not more than 20%). This trend indicates relatively stable dividend payments since inception and aligns well with the company's financial health, though the late initiation of dividend payments could be a concern for strictly income-seeking investors.

Dividends Paid for Over 25 Years?

Explain the criterion for Quanta Services (PWR) and why it is important to consider

The data shows the dividend per share values for Quanta Services from 1998 to 2023. The company began paying dividends only in 2018, marking just 6 years with dividend payments to date. This information highlights that Quanta Services has not established a long-term dividend payment history, which might be crucial for investors looking for steady income. While the trend in recent years shows an increase in dividend payments (starting from $0.04 in 2018 and reaching $0.36 in 2022), the lack of a 25-year payment history may be seen as a downside by those valuing reliability in dividend income. Overall, although the recent dividend increases are positive, the limited history of dividend payments could be perceived as a risk.

Reliable Stock Repurchases Over the Past 20 Years?

A reliable stock repurchase program indicates a company's commitment to returning value to its shareholders and can also signify strong financial health.

Between 2003 and 2023, Quanta Services (PWR) exhibited a mixed record in stock repurchasing. The reliable repurchase years identified are 2009, 2012, 2015, 2016, 2017, 2018, 2019, 2020, and 2021. This shows a clear emphasis on buybacks in the past decade, as opposed to earlier years. The average rate of 1.9563 over 20 years reflects a moderate commitment to repurchases, suggesting financial stability and a strategy focusing on shareholder value in recent years. This trend is generally good, except for potential dilution in the years with higher share numbers.