Last update on 2024-06-27

Rollins (ROL) - Dividend Analysis (Final Score: 6/8)

Dive into Rollins (ROL) comprehensive dividend analysis, evaluated through an 8-criteria system to understand performance and stability.

Short Analysis - Dividend Score: 6

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

Rollins (ROL) has a mixed performance according to the 8-criteria dividend scoring system. With a Dividend Score of 6 out of 8, the company shows a history of stable and consistent dividend payments, a conservative payout ratio below 65%, and well-covered dividends by both earnings and free cash flow. Although the dividend yield in 2023 is slightly lower than the industry average at 1.2365%, Rollins has shown significant dividend growth over 20 years with only minor fluctuations and periods of underperformance. Moreover, the 25-year history of uninterrupted dividend payments and consistent stock repurchases underscore its financial stability and commitment to shareholder returns.

Insights for Value Investors Seeking Stable Income

Rollins’ lower-than-industry-average dividend yield might be a concern for those seeking immediate high income. However, the strong overall performance in dividend growth, coverage by earnings and cash flow, stability, and longevity make it a good candidate for long-term investors. If you prioritize consistent growth and stability over high immediate income, Rollins (ROL) seems worth considering for further investment research.

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 signifies the amount of cash flow you're getting for each dollar invested in an equity position. It is a critical measure for income-focused investors.

Rollins (ROL) has maintained a somewhat consistent dividend yield over the last 20 years, with values ranging from 0.887% to 1.9962%. In 2023, ROL's dividend yield is 1.2365%, which is slightly lower than the industry average of 1.32%. This is a modest concern for ROL, especially for income investors looking for higher yields. Evaluating the year-over-year changes, the yield peaked in 2012 at 1.9962%, influenced by the dividend per share, which climbed consistently from $0.0176 in 2003 to $0.54 in 2023. Despite the strong dividend growth, the stock price also witnessed substantial appreciation, closing at $43.67 in 2023, up from $1.9797 in 2003. The lower-than-average dividend yield in 2023, compared to the industry, indicates that perhaps ROL's stock price has outpaced its dividend growth, thus lowering the yield. Overall, this should be perceived cautiously; while ROL provides stable dividends, the lower-than-industry yield could signal lesser immediate income but possibly greater potential for capital appreciation.

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

The Dividend Growth Rate examines how a company's dividend payments have increased over time. A growth rate higher than 5% annually is generally seen as strong and appealing for long-term investors.

Rollins' dividend ratios for the past 20 years showcase a great deal of volatility. Despite some negative values, the average dividend ratio stands at 21.1366%, which is well above the 5% threshold. This suggests a generally increasing trend in dividend growth, albeit irregularly. The positive trend over the years broadly indicates strong dividend growth, making Rollins a potentially attractive option for income-focused investors. However, the sharp fluctuations in the dividend ratios may concern prudent investors who seek consistency.

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

The payout ratio indicates the percentage of earnings a company distributes to its shareholders in the form of dividends. A lower payout ratio often signals a strong ability of the company to maintain or increase its dividends, as well as financial stability, with more earnings retained for growth.

For Rollins (ROL), the average payout ratio over the past 20 years stands at approximately 48.50%, significantly below the 65% threshold. This lower payout ratio suggests that Rollins has maintained a conservative and sustainable approach to dividend payments, as well as retaining substantial earnings for growth. The payout ratio consistently remained below 65% from 2003 to 2015. However, it saw increases and surpassed the ideal threshold in 2016 (65.20%), 2017 (68.15%), 2018 (57.17%), and particularly in 2019 and 2020, with peak values of 75.68% and 78.02%, respectively. Recently (2021-2023), the payout ratio stabilized, slightly above below threshold values, indicating a return to more conservative dividend practices. Overall, despite a few years with elevated payout ratios, Rollins demonstrates a generally strong trend in regards to dividend sustainability.

Dividends Well Covered by Earnings?

The criterion evaluates if a company's earnings can cover its dividend payouts, assessed using the dividend coverage ratio, calculated as earnings per share (EPS) divided by dividends per share (DPS). A ratio above 1 indicates sufficient coverage by earnings, which is vital for sustainable dividend payments.

Reviewing Rollins' data from 2003 to 2023, the coverage ratios fluctuate. Early years (e.g., 2003: 0.26 and 2004: 0.22) show low coverage ratios, reflecting higher payout risks. However, recent years (e.g., 2020: 0.78, 2022: 0.57) display healthier ratios, indicating improved dividend sustainability, especially compared to the earlier decade. A rising trend up to 2023 (0.61) suggests strengthening earnings relative to dividends. Monitoring these ratios is crucial for long-term investors prioritizing reliable income.

Dividends Well Covered by Cash Flow?

This criterion measures whether a company's dividend payouts are adequately supported by its free cash flow. It is important because a company must have enough cash flow to cover dividend payments; otherwise, it may have to dilute equity or take on debt to meet its obligations.

The data shows that Rollins (ROL) has generally maintained a healthy coverage of dividends by free cash flow from 2003 to 2023. Notably, the ratio of cash flow to dividend payout has fluctuated over the years, peaking in 2013 at approximately 52.3% and hitting its lowest point in 2004 at 18.9%. Most recent finances show a solid coverage ratio of 53.3% in 2023, which is generally considered a good indicator of financial health. Except for some fluctuations, Rollins has consistently kept its dividend payouts well covered by its cash flow. This trend bodes well and reduces the risk of dividend cuts.

Stable Dividends Since the Company Began Paying Dividends?

Analyze the stability of dividends over the past 20 years for Rollins (ROL) and explain its significance.

The data provided shows dividend per share values from 2003 to 2023 for Rollins (ROL). Stability in dividend payments is crucial for income-seeking investors because it ensures a consistent and predictable income stream. Evaluating the data, there seems to be no year in which the dividend per share dropped by 20% or more. The closest decline is from 2020 to 2021, where it went from $0.4233 to $0.32, an approximate 24% reduction. However, the subsequent increase to $0.43 and then $0.54 in subsequent years showcases a recovery and overall growth. This trend is generally good as it shows resilience and growth over the long term, despite occasional dips.

Dividends Paid for Over 25 Years?

Having a history of paying dividends for over 25 years is an indicator of financial stability and commitment to returning capital to shareholders. This consistency is appealing to long-term investors.

Rollins has consistently paid dividends from 1998 to 2023, marking a 25-year period of uninterrupted dividend payments. This is a remarkable trend and signifies the company's robust financial health and shareholder-friendly policies. The consistency in its dividend payments boosts investor confidence as it shows a dedication to sharing profits with shareholders. Additionally, Rollins' ability to increase its dividend per share nearly every year over this period further indicates its financial strength and profitability, thus making it an attractive investment for income-oriented investors. Overall, this trend is highly positive for this criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases, also known as buybacks, occur when a company buys its own outstanding shares to reduce the number of shares available on the market. This can indicate management's confidence in the company's future, potentially leading to enhanced shareholder value. Consistent buybacks over a long period, like 20 years, suggest a long-term strategy to return value to shareholders.

Over the past 20 years, Rollins (ROL) has consistently engaged in stock repurchases during 15 of those years, as evidenced by the reduction in the number of shares from 526,315,218 in 2003 to 489,949,000 in 2023. Specifically, reliable buybacks were noted in years such as 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2023. The fact that the company has an average repurchase rate of -0.3553% per annum indicates a gradual and steady reduction in share count. Among the discussed years, the decrease in shares signals an ongoing commitment to returning capital to shareholders. This trend can be considered favorable as it demonstrates a reliable management strategy for enhancing shareholder value through buybacks.