Last update on 2024-06-27

Raymond James Financial (RJF) - Dividend Analysis (Final Score: 5/8)

Assess the stability and performance of Raymond James Financial (RJF) dividends based on a comprehensive 8-criteria scoring system, earning a final score of 5 out of 8.

Short Analysis - Dividend Score: 5

We're running Raymond James Financial (RJF) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis of Raymond James Financial's (RJF) dividend policy used an 8-criteria scoring system to assess performance and stability. The company received a score of 5 out of 8. Key findings include: a dividend yield lower than the industry average, an annual dividend growth rate above 5% but with high volatility, a sustainable payout ratio below 65%, dividends generally well-covered by earnings but not consistently by cash flow, stable dividends since they began paying, dividends being paid for over 25 years, and reliable stock repurchases being important although it was not explicitly evaluated in the criteria.

Insights for Value Investors Seeking Stable Income

Based on the given analysis, Raymond James Financial (RJF) seems to be a mixed bag. The dividend yield is consistently below industry average, which might not appeal to income-focused investors. Despite a positive trend in dividend growth, its high volatility adds a layer of risk. On the positive side, the payout ratio is well within sustainable limits, dividends are generally well-covered by earnings, and the company has a solid history of stable and increasing dividends over many years. However, recent volatility in cash flow might cause concern. Overall, RJF could be worth looking into for long-term investors who can tolerate some risk but may not be the first choice for those seeking high or consistent dividend income.

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?

Dividends Yield

Raymond James Financial (RJF) has a current dividend yield of 1.5336%, which is lower than the industry average of 2.03%. Observing the dividend yield trend over the last 20 years, we see some interesting dynamics. For instance, the highest yield was recorded in 2008 at 3.2107%, which coincides with the financial crisis when many stocks were undervalued. Since then, RJF's yield has been relatively stable, albeit below the industry average in most years. Dividend yield is a critical criterion for income-focused investors as it measures how much cash flow they are getting back on their capital invested in the stock. A consistently low dividend yield might push potential investors towards competitors with higher yields. RJF's current yield, while stable, may not be the most attractive compared to its peers, making this trend somewhat concerning.

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

Dividend growth rate measures how much a company's dividend payments have increased annually. It's essential to identify companies that can sustainably grow their dividends over time, as this indicates financial stability and shareholder value.

The dividend growth rate for Raymond James Financial (RJF) shows significant volatility over the past 20 years, with notable increases and decreases: for instance, 83.33% in 2008, -19.51% in 2017, and 57.27% in 2019. The average dividend per share ratio is 15.36%, which is above the 5% threshold, indicating good growth. However, the frequent negative values and high volatility suggest potential variability in dividends paid, meaning there is an element of risk alongside the growth. While the average growth rate trends positively, the inconsistency might be a concern for risk-averse investors.

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

Analyzing the average payout ratio is important because it indicates the proportion of earnings a company is paying to shareholders in the form of dividends. A payout ratio below 65% is generally considered sustainable and allows the company to retain enough earnings to fund growth, pay down debt, or cover contingent liabilities.

The average payout ratio for Raymond James Financial (RJF) over the last 20 years is 30.42%, which is significantly below the 65% threshold. Throughout this period, the payout ratio has ranged from a high of 51.31% in 2009 to a low of 20.83% in 2023. This trend is very positive, suggesting that RJF has maintained a conservative and sustainable dividend policy. The low payout ratio indicates that the company retains a considerable portion of its earnings for reinvestment and other financial obligations, which is advantageous for long-term growth and stability. Moreover, such a ratio provides a buffer for the company during economic downturns or unexpected financial pressures.

Dividends Well Covered by Earnings?

Dividends covered by earnings indicate the company's ability to sustain dividend payouts from its current net income. Ideally, this ratio should be less than 100%.

The Earnings Per Share (EPS) and Dividends Per Share (DPS) data for Raymond James Financial (RJF) from 2003 to 2023 indicate that the dividends are covered by earnings. The ratios of DPS covered by EPS range between 0.208 and 0.513. Notably, the lower the ratio, the more comfortably earnings cover dividends. Ratios above 0.3 indicate a healthier dividend coverage. In this case, most years have a ratio below 0.35, reflecting a generally conservative and sustainable dividend policy. The high ratio in 2008 (41.78%) during the financial crisis is a slight concern but is understandable given the economic conditions. Overall, RJF's dividend coverage ratio shows a sound capacity to maintain and likely grow dividends, reflecting prudent financial management. The coverage ratios in recent years (2019-2023) suggest continued strong performance with ratios ranging from 20.8% to 35.4%, which is good as it shows that RJF continues its commitment to sustainable dividend payments.

Dividends Well Covered by Cash Flow?

Dividends that are well covered by cash flow indicate a company's financial health and its ability to consistently pay dividends.

The analysis of Raymond James Financial's free cash flow and corresponding dividend payouts from 2003 to 2023 reveals significant volatility. Notably, the company has experienced multiple years of negative free cash flow - such as 2004, 2006, 2008, 2010, 2016, 2022, and 2023. In these years, free cash flow was insufficient to cover dividends, leading to negative coverage ratios such as -0.1007, -0.5678, -1.7722, -0.0537, -0.1772, and most significantly -14.5789 in 2022. Conversely, in profitable years such as 2011, 2013, and 2016, the coverage ratios were positive but still relatively low: 0.0415, 0.2192, and 0.1250, respectively. A consistent negative trend in recent years - particularly sharply negative in 2022 and 2023 - highlights concerns about RJF's ability to sustain dividend payouts. Sustainable dividend payments rely on robust and stable cash flow. Therefore, the examined trend reflects poorly on RJF’s recent dividend coverage by cash flow.

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.

Reviewing the dividend per share data over the past 20 years for Raymond James Financial (RJF), it's noteworthy that the company has shown commendable stability in its dividend payments. Not a single year saw a drop exceeding 20% in dividend per share. For instance, during the financial turmoil of 2008-2009, while many financial institutions drastically cut or halted dividend payments, RJF's dividends decreased modestly from $0.55 in 2008 to $0.44 in 2009, a reduction of roughly 20%, but not more. Similarly, post-2014, even with occasional dips such as in 2018 and 2020, the dividends quickly rebounded in the subsequent years, showcasing the company's resilient business model. The steady upward trend, especially the consistent annual increases in dividends like $1.1 in 2018 to $1.73 in 2019, and $1.71 to $1.78 between 2021 and 2022, further underscores its investor-commitment. This stability not only appeals to current shareholders but assures potential investors of a reliable income stream, making RJF an attractive prospect for dividend-focused portfolios.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years is a key metric that indicates a company's long-term financial health and commitment to returning value to shareholders. Regular dividend payments over such an extended period can signal stability, profitability, and shareholder-friendly policies.

Raymond James Financial (RJF) has paid dividends consistently from 1998 to 2023, showing a commitment to returning value to its shareholders. The trend in dividend per share has been mostly upward, with a significant rise from $0.11 per share in 1998 to $1.71 per share in 2023. This suggests that the company has not only maintained but also increased its dividend payouts over time, a positive sign for long-term investors. The growth in dividend value, despite the economic downturns during periods like the 2008 financial crisis and the COVID-19 pandemic, highlights RJF's resilience and robust financial health.

Reliable Stock Repurchases Over the Past 20 Years?

Explain Reliable Stock Repurchases and why it is important to consider

Reliable stock repurchases indicate that the company is consistently buying back its own shares. This can be a sign of strong financial health, a commitment to returning value to shareholders, and confidence in the company's future prospects. It may also lead to an increase in earnings per share (EPS) and support the stock price.