Last update on 2024-06-27

Renault (RNL.DE) - Dividend Analysis (Final Score: 4/8)

Comprehensive dividend analysis of Renault (RNL.DE) reveals score of 4/8. Assessing performance and stability using 8 criteria, covering yield, growth, and coverage.

Short Analysis - Dividend Score: 4

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

Based on an 8-criteria analysis of Renault's dividend policy performance and stability: 1. **Dividend Yield**: Renault's current dividend yield (0.6746%) is significantly lower than the industry average (2.91%), with a history of volatility and inconsistency, making it unattractive for stable dividend seekers. 2. **Dividend Growth Rate**: Over 20 years, Renault's average annual dividend growth rate is 6.98%, surpassing the 5% benchmark. However, zero or negative growth years raise concerns about long-term stability. 3. **Payout Ratio**: Renault's average payout ratio is -14.8%, with periods of zero or excessively high payouts, indicating inconsistency and poor sustainability. 4. **Earnings Coverage**: Dividends are poorly covered by earnings, particularly during challenging financial years (like 2009, 2020) with significant operational losses, raising red flags about sustainability. 5. **Free Cash Flow Coverage**: Fluctuating coverage ratios, sometimes below 1, suggest periods where dividends are unsustainable without external funding. 6. **Dividend Stability**: Renault has not maintained stable dividends over the past 20 years, with multiple years of no dividends, hindering reliability for consistent income. 7. **Long-Term Dividend Payments**: Renault has not paid dividends consistently for over 25 years, indicating a lack of long-term reliability. 8. **Stock Repurchases**: Sporadic stock repurchases indicate a flexible but inconsistent approach to reward shareholders.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Renault's dividend policy shows significant inconsistency and volatility, making it a risky choice for investors seeking reliable dividend income. The company has struggled to maintain stable and competitive payouts, with a record of financial challenges affecting their ability to provide consistent dividends. Therefore, for investors focused on stable and reliable dividend stocks, it may be beneficial to look for more dependable alternatives. However, those interested in potential growth and a flexible strategy may still consider Renault, keeping in mind the inherent risks.

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

Renault's current dividend yield of 0.6746% is significantly lower than the industry average of 2.91%. Historically, the dividend yield for Renault has been quite volatile, reaching a peak of 21.8894% in 2008 and dropping to 0% for several years, including 2020 and 2021. This fluctuation indicates an inconsistency in dividend payments which is not ideal for dividend-focused investors. Despite a recent uptick to 0.6746%, it still falls short of its historical highs and significantly below the industry average. This trend suggests that Renault has faced challenges in maintaining stable and competitive dividend yields, which may be a concern for long-term dividend investors.

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

Dividend Growth Rate

The provided numbers indicate the percentage change in Renault's dividend per share each year over the past two decades. Analyzing the Dividend Growth Rate over such an extended period helps investors understand the company's long-term commitment to returning profits to shareholders and its ability to grow its dividend distributions. Moreover, a growth rate higher than 5% signals a robust and expanding earning capacity. Reviewing the data, there are significant fluctuations in Renault's dividend growth rate with several instances of zero or even negative growth. Given the total average Dividend Growth Rate of approximately 6.98%, it surpasses the 5% threshold. However, the frequent zero or negative yields raise concerns. For instance, years like 2009, 2020, and 2021 show drastic drops potentially indicating periods of financial constraints or strategic shifts contrary to shareholder returns. While the trend shows a quantitative positive average, the erratic yearly performance may portray underlying instability.

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

The average payout ratio is a key measure for evaluating the reliability and sustainability of a company's dividend payments. A payout ratio of less than 65% typically indicates that the company is able to allocate a healthy portion of its earnings to reinvestments and growth, while still rewarding its shareholders. It suggests a balanced approach to profit distribution, which is generally viewed positively by long-term investors who seek both income and capital appreciation. Consistent payout ratios below this threshold often imply that the firm's dividends are less likely to be cut in challenging economic times.

Analyzing the payout ratio data for Renault (RNL.DE) over the past 20 years reveals some interesting patterns. Of the 21 years presented, there were several years where the payout ratio was 0%, and a few years with notably high or negative ratios, such as 2008 with 162.9223% and 2019 with -683.8759%. The average payout ratio over this period is -14.7957%. This trend indicates significant volatility, with Renault often not paying dividends or once paying an unsustainable portion of its earnings. On the surface, this would be concerning for dividend-focused investors, as it does not showcase a balanced and reliable dividend policy. The consistent 0% payouts indicate potential years of no dividends, which negatively impacts its attractiveness to income-seeking investors. Such a high level of inconsistency is bad, suggesting the company has faced various profitability and cash flow challenges over the years, likely impacting its ability to maintain a steady dividend distribution.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings is a critical criterion for assessing a company's financial health and sustainability in paying dividends. It's essential to ensure that the earnings are sufficiently higher than the dividends to provide a buffer for economic downturns or unexpected financial difficulties.

Renault's Earnings per Share (EPS) and Dividend per Share (DPS) data over the years reveal varying performance in terms of dividend coverage. The EPS has been highly volatile, ranging from as high as 18.6813 in 2017 to as low as -29.5118 in 2020. Conversely, the DPS has seen periods of no dividends and instances where payouts were made. For example, in 2015 the coverage ratio was 0.1846, indicating that EPS was only slightly more than five times the DPS. Such ratios denote a weak coverage, putting the company's ability to sustain such dividends at risk in the long term. Most alarmingly, negative EPS years like 2009 and 2020 highlight periods where dividends couldn't be covered at all, resulting in ratios of -0.0, leading to absolute unsustainability. Notably, in 2020 alone, EPS plummeted to -29.5118 highlighting major operational losses, and expectedly, dividends weren't sustained. The trend is concerning as well; consistent, adequate dividend coverage is absent, making the dividend policy unsustainable. Improved profit stability or adjusted dividend policy is required to address this financial tension. Additionally, the most recent data for 2023's Dividend per Share is 0.25 against an EPS of 8.1104 giving a coverage ratio of approximately 0.031, which though positive, still indicates a weak buffer and suggests a need for vigilant monitoring. In conclusion, Renault's dividends are generally poorly covered by their earnings, indicating financial instability and possible unsustainability in expected dividend payouts. Adjustments in financial strategy might be essential to ensure future dividend reliability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

The ratio of dividends covered by free cash flow indicates how well a company’s generated cash can support its dividend payments. Generally, a ratio above 1 suggests that the company generates enough free cash flow to cover its dividend payments, while a ratio below 1 indicates potential reliance on external sources or reserves to fund dividends. Renault's history of free cash flow coverage for dividends is volatile. For instance, coverage ratios of 1.02 in 2003 and 2.16 in 2019 imply sufficient cash flow to cover dividends. Years with values like 0.26 in 2004, or negative values such as -0.32 in 2006, indicate problematic periods where dividends far exceeded free cash flow. Given the importance of consistent cash flow to sustain dividend payments, the fluctuating ratios, especially values below 1, underscore a trend where Renault has periodically struggled. The years with zero dividends further highlight this challenge. While improved values in recent years imply better dividend coverage, the broader historical volatility suggests investors should remain cautious.

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.

The data reveals varying dividends for Renault (RNL.DE) over the past two decades. There have been several years with no dividends, specifically between 2008-2010, 2020, and 2021. Given the significant fluctuation in dividends, such as 3.8 in 2008, followed by zero in 2009 and then again in 2020, it casts doubt on their stability. However, periods of gradual growth occur between 2013 (1.16) to 2018 (3.55). There seems to be a recent recovery in 2023 to 0.25 after a drop to zero in 2020 and 2021. This trend indicates poor dividend stability for the criteria mentioned, posing a risk for income-seeking investors. In conclusion, Renault has not maintained stable dividend payments over the past 20 years, making it challenging for those relying on consistent income.

Dividends Paid for Over 25 Years?

Criterion 6: Dividends Paid for Over 25 Years?

Looking at the data over the period 2001-2023, Renault has not been consistent in paying dividends. It paid no dividends at all from 2001 to 2007 and again in 2009, 2010, 2020, and 2021. Such inconsistency indicates that Renault has not met the criterion of paying dividends for over 25 years without interruption. This is a negative trend for long-term income-seeking investors, as it suggests a lack of stable and reliable dividend payouts. Investors looking for consistent dividend payments might view this as a red flag.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

The number of shares Renault (RNL.DE) has bought back over the past 20 years is somewhat sporadic as illustrated by the availability of multiple years of consistent data: 2005, 2008, 2012, 2017-2020, 2022, and 2023. The presence of these years where stock repurchases occurred indicates a degree of reliability, although there were years of inaction. This pattern of behavior indicates Renault's financial strategy remains flexible according to market and internal conditions, which can be positive for shareholders wanting a responsive management team. The average rate of repurchase over these years is 0.104, showing that stock repurchase isn't very high but does represent a consistent buyback policy. This is moderately good since it indicates management’s effort to return capital to shareholders, albeit not at aggressive levels. Consistent repurchasing reflects favorably on the intent of maximized shareholder value.