Last update on 2024-06-27

Ralph Lauren (RL) - Dividend Analysis (Final Score: 4/8)

Explore the stability and performance of Ralph Lauren (RL) dividends with a detailed 8-criteria analysis, scoring 4/8. See insights on growth, yield, and more.

Short Analysis - Dividend Score: 4

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

Ralph Lauren (RL) has a mixed performance in terms of its dividend policy. Its current dividend yield (2.0804%) is slightly below the industry average (2.3%), indicating a need for caution. However, over the past 20 years, the company has generally maintained competitive yields. The dividend growth rate has averaged 25.74%, showing strong long-term growth despite some significant fluctuations. Its payout ratio is very low (8.59% on average), which is well below the recommended 65% threshold, indicating a stable outlook. The dividends had coverage issues early on, but recent years have shown improvement, especially in 2023. Although the dividend per share dropped significantly in 2020, the overall trend has been stable and rising. Ralph Lauren has been paying dividends for 20 years—a good track record, although not yet reaching the 25-year mark. Lastly, the company has a strong record of stock repurchases, boosting investor confidence and stock value.

Insights for Value Investors Seeking Stable Income

Given the mixed performance, Ralph Lauren may be worth considering if you are looking for a stock with a generally strong dividend growth rate and a low payout ratio, even though its current yield is a bit below the industry average and it hasn't been paying dividends for 25 years yet. The company has shown resilience and strong financial management, recovering well after downturns. If you prioritize robust and consistent returns alongside stock repurchases, RL can be a potential addition to your portfolio, but you should be ready for some variability in its dividend payouts.

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 and why it is important to consider

Examining the dividend yield of Ralph Lauren (RL), currently at 2.0804 %, in comparison to the industry average of 2.3 %, reveals insights into the company's shareholder return mechanism. Over the past 20 years, RL's dividend yield has shown notable volatility, fluctuating between as low as 0.2575 % in 2006 to highs like 2.7804 % in 2022. This variability suggests a response to both internal corporate strategy adjustments and external market conditions. Evaluating trends, RL's yield has typically been competitive with, if not exceeding, industry benchmarks. However, in 2023, its yield slightly lags behind the industry average, raising questions about its current payout policy robustness. Given the broader industry context—where competitors maintain yields mostly ranged from 0.74 % to 3.62 %—RL's current yield is moderate but reflects a degree of historical consistency. The company’s ability to maintain competitive yields, despite short-term dips, underscores a broader strategy focusing on ensuring dividends closely align with financial health and market opportunities. Moreover, with increasing dividend per share from $0.15 in 2003 to $3 in 2023, RL demonstrates an ongoing commitment to return value to shareholders. Overall, while not leading the industry this year, RL's yield performance indicates a reasonably strong dividend policy.

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

Explain the criterion for Ralph Lauren (RL) and why it is important to consider

The Dividend Growth Rate is higher than 5% in the last 20 years? Interpret the results: Dividend Ratio: {'year': {'values': ['2003', '2004', '2005', '2006', '2007', '2008', '2009', '2010', '2011', '2012', '2013', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']}, 'dividendPerShareRatio': {'values': [0, 33.3333, 0, 0, 0, 0, 25, 60, 100, 75, 46.4286, -12.1951, 11.1111, 0, 0, 18.75, 13.2211, -74.4143, 199.8547, 42.414, 2.1103]}} Average Dividend Ratio: 25.743509523809525

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

Discuss why having an average payout ratio lower than 65% over the long term is essential for Ralph Lauren's financial health and dividend reliability.

Over the last 20 years, Ralph Lauren (RL) has demonstrated a varying payout ratio, from extremely low figures such as 5.0119% in 2008 to negative ratios in years like 2017 (-166.5695%) and 2021 (-125.2124%). These anomalies might relate to particular market conditions or transformations within the company during those years. Any payout ratio falling within a reasonable range (i.e., below 65%) helps indicate a sustainable dividend outlook. Ralph Lauren's 20-year average payout ratio stands at 8.5856%, considerably below the 65% threshold, suggesting substantial dividend safety and the capacity for reinvestment into the business. However, anomalies in certain years need context-specific interpretations but generally, this low average portrayal is a consistent positive trend.

Dividends Well Covered by Earnings?

Explain the criterion for Ralph Lauren (RL) and why it is important to consider

Dividends should ideally be well covered by the company's earnings to ensure sustainability. Earnings Per Share (EPS) represents net profit divided by the number of outstanding shares, which indicates the company's profitability. Dividends Per Share (DPS) represents the portion of earnings paid out to shareholders. A company with a higher payout ratio may find it difficult to sustain the dividend payments in tough times.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicates a company's ability to generate enough cash to pay its dividend commitments. This is important as it reflects financial stability and sustainability.

Examining Ralph Lauren's coverage of dividends by free cash flow from 2003 to 2023, we observe significant fluctuations. Initially, the ratio was very low, often under 0.1, indicating that the company's dividend payout formed a substantial portion of its free cash flow. However, starting in 2013, the ratio improved significantly, reaching over 0.3 in several instances, indicating healthier cash flow relative to dividend obligations. Most notably, in 2023, the ratio surged to over 1, which flags an exceptional year where free cash flow more than adequately covered dividends. This volatility suggests cautious optimism, as consistent high ratios are crucial for long-term dividend sustainability. Therefore, while recent years show an improving trend, the earlier variability underscores the importance of ongoing cash flow management. Overall, the trend leans positive, but vigilance is warranted.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years. 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.

When analyzing Ralph Lauren's (RL) dividends over the past 20 years, investors will note the general trajectory is upwards. Starting from a dividend per share of $0.15 in 2003, their dividends have seen marked increases over the years. For example, by 2012, the dividend per share reached $1.4, and the most recent data for 2023 shows a dividend per share of $3. However, it is important to highlight the significant dip in 2020, where the dividend per share dropped to $0.688. This represents a significant drop from the previous year's $2.689, more than a 20% decrease, likely due to the economic disruptions caused by the COVID-19 pandemic. Other than this unusual period, Ralph Lauren has demonstrated a strong and generally stable dividend payment trend, which is ultimately a positive signal for income-seeking investors.

Dividends Paid for Over 25 Years?

Determining whether a company has paid dividends consistently for over 25 years can signal financial stability.

Ralph Lauren (RL) has not paid dividends for over 25 years. Taking insights from the given dividend per share data, the company started paying dividends in 2003 at $0.15 per share. With dividends paid continuously since then, Ralph Lauren has a record of 20 years of dividend payments. This trend signals a positive commitment to returning value to shareholders, although it fell short during 2020 where the dividend per share dropped to $0.688, likely reflecting economic pressures from the COVID-19 pandemic. However, uniform recovery to $2.938 per share in 2022 and to $3 in 2023 indicates a strong recovery and positive growth, enhancing investor confidence but not fulfilling the 25-year requirement. Thus, Ralph Lauren portrays a committed yet evolving dividend policy.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over a long period can indicate a company's strong financial health and shareholder commitment.

Over the past 20 years, Ralph Lauren (RL) has demonstrated a consistent trend in stock repurchases, as indicated by its decreasing number of outstanding shares from 107,600,000 in 2007 to 67,700,000 in 2023. This represents an average annual decrease of approximately 1.86%. This trend is positive because it reflects the company’s commitment to returning value to shareholders and confidence in its financial stability. These repurchases likely boosted earnings per share (EPS) and also signify judicious allocation of excess cash flow. The consistency, especially during years when global economic conditions were strained like in 2008 and during the COVID-19 pandemic, is particularly notable and a sign of Ralph Lauren's robust financial management.