Last update on 2024-06-27

Royal Gold (RGLD) - Dividend Analysis (Final Score: 4/8)

Royal Gold (RGLD) dividend score 4/8 assessed based on 8 criteria, indicating mixed performance and sustainability of its dividend policy.

Short Analysis - Dividend Score: 4

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

The dividend analysis of Royal Gold (RGLD) uses eight criteria to evaluate its performance and stability. With an overall score of 4 out of 8, Royal Gold shows mixed results. The key findings are as follows: 1) The dividend yield of 1.2401% is lower than the industry average of 1.81%, affected by a significant stock price increase over the years. 2) The average annual dividend growth rate of 15.98% is impressive but inconsistent. 3) The average annual payout ratio of 36.91% is well within the sustainable range of 65%. 4) Dividends are not consistently well-covered by both earnings (EPS) and cash flow, presenting potential risks. 5) Dividend stability is compromised by a notable drop in 2015. 6) Dividends have been paid for 24 years, just missing the preferred 25-year period. 7) Stock repurchases have been infrequent over the past 20 years, indicating limited direct capital return to shareholders through buybacks.

Insights for Value Investors Seeking Stable Income

Given the mixed results of the dividend analysis, Royal Gold presents both positive and negative aspects for potential investors. The strong dividend growth rate and sustainable payout ratio are promising. However, concerns arise due to inconsistent earnings and cash flow coverage, dividend instability in some periods, and infrequent stock buybacks. Therefore, while Royal Gold could be a strong investment for those focused on long-term growth and can tolerate some risk, income-seeking investors prioritizing stable dividends and strong coverage ratios might want to approach with caution. Further monitoring and additional evaluation would be prudent 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 measures the cash flow an investor is getting back for each dollar invested in an equity position. It's calculated as the annual dividend payment divided by the stock price.

Royal Gold's current dividend yield of 1.2401% is lower than the industry average of 1.81%. However, when we look at the historical dividend yield of Royal Gold over the last 20 years, it becomes evident that Royal Gold has seen significant fluctuations, with peaks such as 2.1923% in 2013 and lows like 0.4204% in 2003. In general, the company has consistently maintained a lower dividend yield compared to the industry average. One contributing factor is the consistent increase in Royal Gold's stock price, which has risen from $20.93 in 2003 to $120.96 in 2023, thereby diminishing the yield as the dividend payout has not increased at the same pace. Although the yield is lower than the industry average, it is important to consider the long-term trend and stability Royal Gold maintains in its dividend payments, thus aiming to provide sustained returns to its shareholders.

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

Examining the Dividend Growth Rate over the last 20 years provides insight into whether the company has a consistent and increasing reward for shareholders.

Royal Gold (RGLD) has shown a fluctuating dividend growth rate over the past 20 years, with extreme variances ranging from as high as 75.44% in 2005 to as low as -29.6% in 2003. The average dividend growth rate stands at 15.98%, which is significantly above the benchmark of 5%. However, the variability in growth rates indicates inconsistency, which might concern some investors despite the overall high average. The positive takeaway is that, on average, the company demonstrates a robust dividend growth rate, which is encouraging from a long-term investment perspective. Moreover, the sustained periods of positive dividend growth, such as in recent years, should provide assurance to stakeholders. Hence, while the trend is good in terms of the average number, the yearly variability needs to be monitored closely.

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

The payout ratio indicates the proportion of earnings a company distributes as dividends. A ratio below 65% is generally sustainable.

The average payout ratio for Royal Gold over the last 20 years stands at 36.91%, well below the 65% threshold. This indicates a sustainable dividend as less than half of the company's earnings are being distributed to shareholders. Notably, fluctuations include negative payout ratios in 2016 and 2018, which require closer scrutiny, but overall, the trend is favorable. The low payout ratio provides Royal Gold with ample room to reinvest in growth opportunities while maintaining dividend payments.

Dividends Well Covered by Earnings?

Ensuring that dividends are well-covered by earnings is crucial to assess the sustainability of the dividend payouts. It indicates whether a company generates sufficient profits to support its dividend distributions without compromising growth or incurring additional debt.

The ratio of Dividends per Share covered by Earnings per Share (EPS) for Royal Gold (RGLD) displayed a fluctuating trend over the past two decades. A notable observation is that in some years such as 2012, 2013, and 2015, the coverage ratio exceeds the desirable level of 1, indicating that dividends were more than covered by earnings. However, in years like 2016 and 2018, the negative ratios clearly reflect insufficient earnings to cover dividends, an alarming signal that could question dividend sustainability if it reoccurs consistently. In more recent years, the coverage ratio trends higher but stays below 1 (specifically, the ratios are 0.7388 in 2019, 0.3681 in 2020, 0.2599 in 2021, 0.3842 in 2022, and 0.4110 in 2023), highlighting some weaknesses. Despite RGLD maintaining a positive spread, the persistent sub-1 coverage suggests careful monitoring is required to assess whether this trend reflects a temporary weakness or requires strategic financial restructuring. Therefore, it is critical for Royal Gold to bolster its EPS to assure investors of the sustainability of its lucrative dividend payouts.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates whether the company generates enough free cash flow to pay dividends. It ensures dividend sustainability.

Royal Gold's cashflow coverage of dividends has varied significantly over the years. Notably, years like 2003, 2004, and 2005 showed modest coverage ratios (0.20-0.25), while some like 2014 exhibited strong coverage (0.79). However, there are troubling periods, especially 2006, 2007, 2009, 2010, 2011, 2012, 2013, 2016, and 2022, where the coverage ratios were negative, indicating free cash flow was insufficient to cover dividends. The sharp fluctuations in cashflow coverage, combined with years of negative ratios, suggest instability, raising concerns about the sustainability of its dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Evaluating the dividend per share data for Royal Gold (RGLD) over the past 20 years (2003 to 2023), it's evident that there was a significant drop in dividend payouts during certain periods. Notably, in 2009, the dividend per share fell to $0.33 from $0.36 in 2008, representing a decrease of approximately 8.3%, which is within the acceptable range of stability. In 2014, the dividend decreased to $0.85 from $1.01 in 2013, roughly a 15.8% reduction. Finally, 2015 saw a substantive drop to $0.66 from $0.85, an evident 22.4% reduction. This decline is more than the acceptable threshold, marking instability in the dividend payments. Generally, most periods did not experience a drop of more than 20%, but the critical year of 2015 failed to maintain this metric. Thus, Royal Gold's stability in dividends over the last two decades presents mixed results for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years refers to the practice of a company consistently paying dividends to its shareholders for a period of at least 25 years. This is considered an important indicator of a company's financial stability, commitment to shareholder returns, and profitability over the long term.

Royal Gold (RGLD) started paying dividends in the year 2000 and has consistently paid them for 24 years as of 2023. With historical dividends per share starting at $0.05 in 2000 and growing to $1.5 by 2023, Royal Gold's commitment to returning value to shareholders is evident. This growth in dividends per share indicates robust financial health and profitability trends. However, since the 25-year mark has not been fully achieved yet, this criterion is close but not fully met. The positive trend is good as it shows stability and profitability, yet this is one year short of the ideal benchmark.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

The analysis of Royal Gold's (RGLD) stock repurchase activity over the past two decades reveals a pattern not heavily inclined towards share buybacks. The number of outstanding shares has shown an increasing trend from 20,231,638 in 2003 to 65,613,002 in 2023. Only two years (2005, 2016) witnessed share repurchases, amounting to an average repurchasing rate of 6.3941 over this 20-year period, which indicates a relatively infrequent buyback strategy. Typically, a consistent buyback program is appreciated by investors as it often signals management's confidence in the company's prospects and serves to return value to shareholders. The rarity of buybacks in Royal Gold's case might suggest a preference for alternative capital allocation strategies, such as reinvestment into the business or debt repayment, which could also be positive from a long-term strategic perspective. However, it could also be viewed negatively by investors who prefer the direct return of capital through buybacks.