Last update on 2024-06-27

Everest Re Group (RE) - Dividend Analysis (Final Score: 5/8)

Comprehensive analysis of Everest Re Group (RE) dividend performance. Understand long-term growth, stability, and potential investment risks.

Short Analysis - Dividend Score: 5

We're running Everest Re Group (RE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Everest Re Group (RE) is evaluated based on an 8-criteria scoring system for its dividend policy. The company scores a 5, indicating an average performance. It has a low dividend yield of 0.8902%, which is significantly lower than the industry average of 3.11%. The dividend growth rate over the last 20 years has been unstable and below 5% per annum on average, showing volatility, especially with years yielding 0% dividends. Although the company's payout ratio has generally stayed below 65%, the dividend coverage by earnings and cash flow has been unpredictable. Everest Re Group has maintained stable dividends for the most part, with consistent dividend payments over 25 years and performing regular stock repurchases, enhancing shareholder value despite a few concerning fluctuations. The overall trend projects a mix of long-term growth with recent instability in dividends and cash flow coverage.

Insights for Value Investors Seeking Stable Income

If you're an income-focused investor, Everest Re Group might not be the ideal choice due to its lower-than-average dividend yield and unstable growth rate. However, if you're looking for long-term capital gains, the increasing stock price and consistent dividends over 25 years offer a promising aspect. Before making a decision, potential investors should investigate the reasons behind the recent fluctuations in dividends and cash flow coverage.

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 is a financial ratio that shows how much a company pays in dividends each year relative to its stock price. It’s an important measure to assess income from an investment.

Everest Re Group (RE) has a current dividend yield of 0.8902%, which is significantly lower than the industry average of 3.11%. Over the past 20 years, Everest Re Group's dividend yield has generally fluctuated but maintained a relatively low yield compared to the industry average. Notably, the yield peaked during the financial crisis in 2008 at 2.5217%, but it has trended downward and is currently at its lowest point. When compared to the industry, the dividend yield tends to underperform. This is concerning for income-focused investors looking for high yield. However, the trend can be attributed to the substantial increase in stock price, which climbed from $84.6 in 2003 to $370.7 in 2023. Despite the lower yield, the absolute dividend per share has increased from $0.36 in 2003 to $3.3 in 2023. Thus, investors may still find value in capital gains rather than income returns.

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

Dividend Growth Rate over a long period indicates the stability and profitability of the company. A growth rate higher than 5% suggests that the company has consistently increased its dividends, reflecting strong financial health and commitment to returning value to shareholders.

Analyzing the Dividend Ratio from 2003 to 2023 for Everest Re Group shows considerable fluctuations. For example, in 2007 the ratio was 220%, which indicates an exceptionally high dividend in that year. However, there are also years with 0% dividends, such as 2008-2011 and 2021. Despite these inconsistencies, the overall structure of the ratio does not seem to support a steady growth rate of over 5% per annum. Given an average Dividend Ratio of 17.95%, it’s clear that while there are spikes in some years, the overall growth trend has been volatile, not stable. Therefore, the trend is bad for this criterion, indicating instability in dividend payouts.

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

Explain the criterion for Everest Re Group (RE) and why it is important to consider

The criterion of having an average payout ratio lower than 65% over the last 20 years is crucial because it demonstrates the company's ability to sustain its dividend payments. An excessively high payout ratio might indicate that the company is paying out more to shareholders than it can afford from its earnings, which could lead to financial instability.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings indicates that a company generates sufficient profits to maintain and grow its dividend payouts, ensuring long-term sustainability and income reliability for investors.

For Everest Re Group, the Earnings per Share (EPS) and Dividend per Share (DPS) data show fluctuating coverage over the years. Most notably, the low or negative EPS in certain years resulted in EPS not covering the DPS adequately or at all (e.g., 2005, 2008, 2011, 2017, 2020, and 2023). However, the recent trends from 2019 to 2021 show improved EPS to DPS coverage, highlighting a positive trend. For example, in 2021, the EPS was $35.0876 against a DPS of $6.2, resulting in a robust coverage ratio of 5.66. The overall trend suggests unpredictability in coverage, reflecting operational volatility, yet the company has managed to sustain its dividends despite challenging periods. The trend, while momentarily improving, might caution investors to periodically review the EPS coverage to ensure future dividend reliability.

Dividends Well Covered by Cash Flow?

This criterion examines whether Everest Re Group's dividends are adequately covered by its free cash flow. It is crucial as it indicates the sustainability of dividend payments without stressing the company’s cash reserves.

Analyzing the dividend coverage ratio over the years for Everest Re Group (RE), we observe that the coverage ratio has generally been within a healthy range, especially around the mid to late 2000s. For instance, the maximum ratio was observed in 2018 at around 35.44%. However, significant drops are noted in the last few years with a steep decline in 2020 (8.67%) and 2021 (6.44%), followed by no dividends covered by cash flow in 2023. This inconsistency implies a worrying trend where the company might struggle to maintain its dividend payments if free cash flow cannot robustly cover these liabilities. It raises caution about the long-term sustainability of dividends if cash flow generation isn’t improved or stabilized.

Stable Dividends Since the Company Began Paying Dividends?

Dividend stability over the past two decades ensures predictable income streams for investors. This is crucial for financial planning and long-term investment strategies, especially for retirees who rely on dividend income.

Analyzing the dividend per share (DPS) of Everest Re Group (RE) over the past 20 years, we note a general trend of increasing dividends. Starting at $0.36 in 2003, the DPS has steadily climbed to as high as $6.5 in 2022. There is one notable drop in 2023, where the DPS decreased to $3.3 from $6.5 in the previous year, representing a decline of over 45%. Prior to this, there were no instances where the dividend per share dropped by more than 20%. This single instance in 2023 is concerning for income-seeking investors who rely on stable and predictable dividends. Nevertheless, the overall long-term trend remains positive, and the company exhibited strong dividend growth for most of the 20 years.

Dividends Paid for Over 25 Years?

Evaluation of a company's ability to consistently pay dividends over a long period indicates financial stability and shareholder commitment.

Everest Re Group has paid dividends consistently from 1998 to 2023 without any missed payments over this 25-year period. Analyzing the dividend growth rate, the dividend per share grew from $0.2 in 1998 to $3.3 in 2023. Although it had minor stagnations around $1.92 between 2007 and 2012, the growth trajectory from 2013 onwards is impressive. This trend is very good as it signifies the company’s strong commitment to rewarding shareholders and reflects positively on its financial health and profitability over a long-term horizon.

Reliable Stock Repurchases Over the Past 20 Years?

Analyzing stock repurchases over a significant period gives us insights into a company's strategic financial planning and signal confidence in its future prospects. It also helps in enhancing shareholder value by reducing the number of outstanding shares.

Over the past 20 years, Everest Re Group (RE) has consistently reduced its outstanding shares from 55,010,000 in 2003 to 39,157,200 in 2023, with the exception of a sharp increase to 69,900,000 in 2022. The average repurchase rate over this period was 11.51%. This trend is generally positive as it shows that the company has a history of buybacks, enhancing shareholder returns and indicating strong cash flows. However, the significant increase in 2022 raises some concern and warrants further investigation to understand the reason behind this anomaly.