Last update on 2024-06-27

Republic Services (RSG) - Dividend Analysis (Final Score: 5/8)

Discover the in-depth dividend analysis of Republic Services (RSG) with a final score of 5/8, covering stability, growth rates, payout ratios, and more.

Short Analysis - Dividend Score: 5

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

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 annual dividend payments relative to the stock price.

When comparing Republic Services (RSG) with an industry average dividend yield of 1.76%, its current dividend yield of 1.2492% is lower. Historically, RSG's dividend yield has varied significantly, peaking in certain years like 2008 and 2015. However, in recent years it has declined. A lower dividend yield could signal that RSG's dividend growth has not kept pace with its stock price increases over the last two decades, as highlighted by substantial closing prices ranging from $17.0867 in 2003 to $164.91 in 2023. This trend might be seen as unfavorable for income-focused investors, as the yield is underperforming the industry average.

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

The criterion checks if Republic Services has achieved a consistent dividend growth rate above 5% over the last 20 years. A higher dividend growth rate is essential as it indicates the company’s commitment to returning capital to shareholders and its sustained financial health.

Based on the provided dividend per share ratios from 2003 to 2023, the average ratio is approximately 21.10%. This appears to surpass the 5% threshold significantly, although there are notable fluctuations. For instance, major declines, such as the -15.07% in 2016, and abrupt increases, such as the 200% in 2004, indicate variability in dividend distribution strategy. Generally, while an average above 20% over two decades reflects an overall positive trend, the inconsistency may raise caution. Overall, with an average way above the 5% criterion, the trend is good, but the yearly fluctuations suggest occasions of potential instability.

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

The Average Payout Ratio determines how much of a company's earnings are being paid out as dividends to shareholders. It is crucial to assess sustainability and growth potential of dividends.

The average payout ratio for Republic Services (RSG) over the last 20 years stands at approximately 53.59% which is notably below the 65% benchmark. This is a positive indicator, demonstrating that the company distributes a consistent yet sustainable proportion of its earnings as dividends. This restraint suggests that Republic Services retains a significant portion of its earnings to reinvest back into the business or to buffer against future uncertainties. Such a trend is favorable as it hints at a solid foundation for future dividend stability and potential growth. Particularly impressive are the low payout ratios in 2003 (10.95%) and 2004 (23.50%), although there was a concerning spike in 2008 to 193.55% due to likely external financial pressures. Despite these fluctuations, maintaining an average below 65% affirms prudent financial management from Republic Services.

Dividends Well Covered by Earnings?

Dividends being covered by earnings means the company generates sufficient profit to pay out dividends. It's crucial for judging sustainability.

Republic Services (RSG) consistently shows that its earnings per share (EPS) not only cover its dividends per share but often do so with a comfortable margin. Even though there was a spike in 2008 where dividends constituted a much higher percentage of earnings (193.5%), the general trend indicates stability. For instance, in recent years (2018-2022), EPS coverage was quite solid, with dividends taking up 35%-55% of earnings. In 2023, the dividend payout ratio was about 37.6%, indicating good coverage and suggesting that the company can comfortably sustain its dividend policy. This trend is generally good for the criterion as it shows prudent financial management and the ability to maintain or even potentially grow dividends without compromising financial health.

Dividends Well Covered by Cash Flow?

One key metric for investors to consider is whether a company's dividends are well covered by its free cash flow. This indicates the financial health and sustainability of dividend payments.

Observing Republic Services' dividend coverage by cash flow from 2003 to 2023, the ratio has fluctuated significantly. Initially, the coverage was quite low between 2003 and 2005, improving to over 100% in 2008. This peak indicates that free cash flow was sufficient to cover the dividends paid. However, the long-term trend shows a decline in coverage ratio from 2010 to 2023, moving from above 50% to approximately 32%. This downward trend suggests that while the company has consistently increased its dividends, the pace of growth in free cash flow has not kept up, which may raise concerns about the sustainability of future dividend payments. The declining coverage points to the need for closer financial management and potentially slower growth in dividend payouts to maintain a healthy balance.

Stable Dividends Since the Company Began Paying Dividends?

This criterion examines the dividend per share over the past 20 years, focusing on drops exceeding 20%, important for income investors seeking stable returns.

Based on the given data of Republic Services' (RSG) dividends per share from 2003 to 2023, we observe consistent growth over the years. While the dividends steadily increased from $0.08 in 2003 to $2.06 in 2023, there is a notable exception in 2015. In 2015, the dividend per share dropped from $1.46 to $1.24, which is a decline of more than 20%. This drop stands out as significant and could be a potential concern for income-seeking investors looking for dividend stability.If we examine further, the decline in 2015 did not persist, as we see the dividend rising again from 2016 onward, reaching new highs each subsequent year. Hence, except for one anomalous year, Republic Services has demonstrated robust dividend growth and stability overall. Despite this one-year drop, the long-term trend is positive, making it relatively favorable albeit with caution for investors prioritizing impeccable stability.

Dividends Paid for Over 25 Years?

Explain the criterion for Republic Services (RSG) and why it is important to consider

Criterion 6 examines whether Republic Services (RSG) has paid dividends consistently for over 25 years. Consistent dividend payments for this long period are often indicative of a company's financial health and stability. It also demonstrates management's commitment to returning value to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to the consistent buying back of company shares, reflecting management's confidence in the company's future and helping to increase earnings per share (EPS).

Republic Services (RSG) has displayed a trend of reliable stock repurchases over the past 20 years, with significant buybacks occurring in 2004, 2005, 2006, 2007, 2011, and consecutively from 2012 to 2023 (excluding initial years). There's a noticeable volatility around 2008/2009, which corresponds with the financial crisis (during which shares increased sharply). Despite this, the overall trend of the company's share count has declined from 243.15 million in 2003 to 316.2 million in 2023. This significant reduction of number of shares outstanding underscores deliberate repurchase actions, solidifying confidence in the company's prospects; a healthy average repurchase rate of 2.7011 indicates a continued commitment to creating shareholder value. Ultimately, this trend paints a favorable scenario for RSG's shareholders, supporting higher EPS and reducing the dilution effect.