Last update on 2024-06-27

Randstad (RAND.AS) - Dividend Analysis (Final Score: 5/8)

Analyze Randstad's (RAND.AS) dividend performance using an 8-criteria scoring system. Final score: 5/8. Is it a stable, high-yield investment?

Short Analysis - Dividend Score: 5

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

The analysis evaluates Randstad's (RAND.AS) dividend performance using 8 criteria. The company has shown positive trends with a current dividend yield of 5.0247%, much higher than the industry average of 2.6%. Moreover, its dividend growth rate is above 5%, averaging 13.084% over 20 years, indicating good potential for increasing dividends. However, the payout ratio is concerningly high at 247.36%, suggesting long-term sustainability issues. While the company generally covers its dividends with earnings and cash flow, there were significant gaps in turbulent years, such as 2009 and 2010 when no dividends were paid. The company failed the stability criterion due to zero payouts during those years. Randstad has been less consistent in stock repurchases and hasn't paid dividends for over 25 years, which is crucial for long-term income investors.

Insights for Value Investors Seeking Stable Income

For investors prioritizing high yield and growth potential, Randstad may be appealing. However, the high payout ratio and past instances of unpaid dividends indicate potential risks, particularly during economic downturns. Risk-averse investors might want to consider more stable options. Nonetheless, the recent positive trends in dividend coverage and yields are promising. Thorough due diligence is recommended before investing.

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 annual dividends paid per share to the price per share. It shows how much cash flow you're getting back for each dollar invested in an equity position.

Randstad's current dividend yield of 5.0247% is significantly higher than the industry average of 2.6%. Over the past two decades, the company's dividend yield has fluctuated substantially, with peaks of 8.5911% in 2008, 6.8845% in 2018, and 8.7781% in 2022. This can be seen as positive for income-focused investors as it indicates a higher return on investment compared to its peers. However, the variability suggests market conditions and company performance influence these yields significantly. Historical context shows instances of zero dividends in tough years like 2009 and 2010, pointing to potential risks during economic downturns. Nonetheless, based on this criterion, current trends are favorable for investors seeking substantial yields.

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

Assessing Dividend Growth Rate over the past 20 years helps to determine the company’s ability to consistently increase its payouts, which is crucial for long-term investors.

Randstad's (RAND.AS) dividend growth rate has seen significant fluctuations over the past 20 years, with years even showing no dividend payouts (e.g., 2008, 2009). The average dividend growth rate stands at 13.084%, which is well above the 5% threshold. Although periods of negative growth are noted (e.g., 2004, 2009, 2014, 2020, 2023), the overall trend indicates a strong capability to increase dividends over time. This is a positive indicator for potential and existing investors as it reflects the company's earnings capacity and shareholder-friendly policies. However, the significant negative years suggest volatility, which might be a consideration for risk-averse investors.

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

The payout ratio measures how much of a company's earnings are paid out as dividends. Generally, a ratio below 65% indicates that the company retains enough earnings for reinvestment, which is sustainable over the long-term.

Randstad's average payout ratio over the last 20 years is approximately 247.36%. This is significantly higher than the ideal threshold of 65%, which indicates a potential problem for long-term sustainability. In some years, the payout ratio exceeded 100%, implying that Randstad paid more in dividends than it earned. For instance, during 2008 and 2012, the payout ratios were sky-high at 2125.85% and 1237.62%, respectively. This might be due to extraordinary payouts or poor earnings performance in those years. Although there were zero payouts in 2009 and 2010, the exceedingly high ratios in other years significantly impacted the long-term average.

Dividends Well Covered by Earnings?

A key metric for assessing dividend sustainability is comparing the dividends per share (DPS) to the earnings per share (EPS), indicating how well earnings cover dividends. It's crucial because a consistent ability to cover dividends ensures future payouts.

From 2003 to 2023, Randstad demonstrated variable coverage of dividends by earnings. Meaningful inconsistencies appear, especially during periods such as 2009 and 2008 where the EPS sharply declined, resulting in uncovered dividends. In contrast, in years like 2012 and 2011, we witness high coverage indicating a strong dividend sustainability, bolstered by a high EPS. Overall, since 2013 the trend predominantly shows positive coverage, suggesting healthier sustainability. Yet, recent declines in the coverage ratio—2022 and 2023—warrant caution. Hence, while Randstad shows a commendable long-term ability to cover dividends, fluctuations highlight potential risks.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow mean that the company generates sufficient free cash flow to pay its dividends. By comparing dividend payouts to free cash flow, investors can gauge the sustainability of dividend payments.

Observing Randstad's financial data from 2003 to 2023, the free cash flow levels and corresponding dividend payout amounts provide valuable insight into the company's payout sustainability. The ratio of dividends covered by cash flow varies significantly across the years, with particularly low ratios seen in 2009, 2010, and 2020, indicating a struggle to cover dividends from free cash flow alone in those years. Contrarily, high ratios in 2017, 2021, and 2022 suggest times of strong cash flow support for dividends. The trend overall appears sporadic, with multiple years below the 50% mark, marking these potential warning signs. However, the most recent years show improvement with figures nearing or surpassing 100% coverage, which is a positive trend for dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Dividend stability means maintaining payments without significant drops, which is crucial for reliable income streams.

Over the past two decades, Randstad's dividend payment history shows some fluctuations. Specifically, in 2009 and 2010, dividends were cut entirely to 0, which is certainly a drastic reduction and interrupts the stability sought by income-seeking investors. Outside these years, the company resumed and increased its dividend, peaking at €5 per share in 2021. However, the zero payouts in 2009 and 2010 represent a significant instability for this evaluation criterion.

Dividends Paid for Over 25 Years?

Explain the criterion for Randstad (RAND.AS) and why it is important to consider

The criterion examines whether the company has paid dividends consistently for the last 25 years. A company that has done so is often seen as stable and committed to returning value to its shareholders. It's an essential benchmark for long-term investors seeking reliable income.

Reliable Stock Repurchases Over the Past 20 Years?

What makes reliable stock repurchases over 20 years a vital aspect to evaluate in dividend analyses?

Monitoring stock repurchases over two decades can reveal the company's commitment to returning value to shareholders. A consistent stock repurchase strategy not only reflects confidence in the company’s financial health but can also signal management’s belief that the stock is undervalued. Companies repurchasing their shares tend to have excess cash flow, enabling them to boost shareholder returns without compromising on growth or capital investments.