Last update on 2024-06-27

SMA Solar Technology (S92.DE) - Dividend Analysis (Final Score: 3/8)

Detailed analysis of SMA Solar Technology's (S92.DE) dividend policy using 8-criteria scoring system. Final score: 3/8. Insights into dividend yield, growth, and more.

Short Analysis - Dividend Score: 3

We're running SMA Solar Technology (S92.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for SMA Solar Technology (S92.DE) scores 3 out of 8, revealing challenges and instability in its dividend policy. The company shows inconsistency in its dividend yield, fluctuating dividend growth rates, and sporadic dividend payments. While it has a low payout ratio that suggests prudence, the earnings and cash flow support for dividends are inconsistent. Additionally, it lacks a long-term history of dividend payments and share buybacks, which can be critical for attracting income-focused investors.

Insights for Value Investors Seeking Stable Income

Based on the analysis, investors seeking stable and consistent income from dividends might find SMA Solar Technology lacking. The company's irregular dividend payments and insufficient support from earnings and cash flows suggest a less reliable dividend stock. For dividend-focused investing, it might be worth considering more stable alternatives with consistent payout histories and stronger financial health.

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?

Explain the criterion for SMA Solar Technology (S92.DE) and why it is important to consider

Dividend Yield typically represents the ratio of the company's annual dividend compared to its share price. A dividend yield of 0% means the company has not issued dividends in the given year. Over the last 20 years, SMA Solar Technology's dividend yield fluctuated significantly, peaking at 6.9501% in 2011 but standing at 0% for several years, including the last five years. Comparing it with the industry average from your data, the industry's yields have generally been more stable and consistently positive, albeit lower. This fluctuating trend is not favorable for SMA Solar Technology, especially for investors seeking stable and consistent income from dividends. The inconsistency suggests potential instability or reinvestment strategies by the company. Furthermore, the company's stock price volatility implies that shareholders are not compensated by dividends during downturns or even stable periods. Consistent yields, as seen in the industry average, typically attract long-term investors looking for reliable income, a potential shortcoming for SMA Solar Technology.

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

The dividend growth rate (DGR) represents the annualized percentage rate of growth that a particular stock's dividend undergoes over a period, in this case, the past 20 years. It is important because it indicates the company's ability to increase shareholder value over time through distributions. A dividend growth rate higher than 5% is often a positive indicator of a company's strong financial health and profitability.

When analyzing the dividend growth rate for SMA Solar Technology (S92.DE) over the past 20 years, we observe significant volatility in the dividend per share ratios. For instance, the ratios vary from high positive figures like 130.7692% in 2011 to drastic negatives such as -100% in multiple years. The overall average dividend growth rate stands at -7.19%, which is significantly lower than the desired 5% growth rate. Consequently, this trend suggests a lack of consistency and reliability in SMA Solar Technology's dividend payments, implying potential financial instability or fluctuating profitability. Hence, this trend is not favorable concerning the criterion of having a dividend growth rate higher than 5%.

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

The payout ratio measures the proportion of earnings a company pays to its shareholders in dividends. A payout ratio lower than 65% typically indicates that the company is retaining sufficient earnings for growth, reinvestment, or to cope with economic downturns. It's essential for assessing the sustainability and growth potential of dividend payments.

Over the past 20 years, SMA Solar Technology (S92.DE) has had an average payout ratio of 6.66%, well under the 65% threshold. This very conservative payout ratio may be seen as a positive sign of financial prudence, ensuring the company retains a significant portion of its earnings for reinvestment or reserves. However, in certain years like 2013 and 2021, the payout ratio was negative, indicating losses or dividend cuts due to financial difficulties. Overall, this trend suggests fiscal conservatism and sustainable dividend practices, albeit with notable years of financial setbacks.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings refers to the ability of a company to pay its dividends using just its net earnings. This is important because it ensures that the company is not using debt to pay dividends, indicating financial health and sustainability.

Assessing SMA Solar Technology (S92.DE), the Earnings per Share (EPS) and Dividend per Share (DPS) data show mixed results for dividend coverage. During several years, earnings did not suffice to fully cover paid dividends. Particularly, for years like 2009 and 2010, the coverage ratio was around 0.21 and 0.12 respectively, implying less than optimal coverage. Moreover, some years like 2023, no dividend was paid, possibly indicating either strategic reinvestment or insufficient earnings. While EPS saw significant fluctuations, with negative reports in certain years (e.g., 2013, 2014, 2018, 2021), DPS was often suspended, possibly reflecting a prudent choice given inconsistent profitability. Overall, the trend suggests inconsistency, which is unfavorable for dividend-seeking investors as stability in dividend payments covered by earnings is key for investor confidence.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow is an important metric to evaluate a company's ability to generate enough cash to support its dividend payments. It ensures sustainability of dividends and indicates good financial health, assuring investors of steady income.

The ratio of dividends covered by cash flow for SMA Solar Technology from 2006 to 2023 shows a fluctuating trend. Particularly striking are the years 2012, 2013, 2014, 2018, and 2019, where the coverage ratio turned negative, indicating that free cash flow was insufficient to cover the dividend payouts in those years. Conversely, the year 2011 had a high coverage of 1.34, and 2012 showed an exceptionally strong coverage ratio of 2.83 – though followed by a shift to a negative trend. Notably, the company ceased dividend payouts in the years 2022 and 2023, likely due to insufficient free cash flow. Overall, the trend indicates volatility and potential risks for dividend sustainability, raising concerns for long-term stability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are crucial for income investors aiming for a reliable income stream. It reflects a company's consistent earning power and prudent financial management.

Over the past 20 years, SMA Solar Technology's dividend per share has shown significant fluctuations. Starting from 2009, the dividends varied greatly, with notable periods of non-payment (e.g., 2006–2008, 2014–2016, 2020, and 2022). The highest dividend was in 2011 at 3 per share, but this was not sustained. Given the drop to zero in several years, stability is lacking. Thus, the trend fails to meet the criterion of not dropping by more than 20%, which is unfavorable for income-seeking investors. A stable dividend that meets this criterion signals financial strength and reliability, which SMA Solar Technology does not demonstrate in this aspect.

Dividends Paid for Over 25 Years?

This criterion evaluates whether a company has a long-standing tradition of paying dividends, ideally over a period of 25 years. It is important because consistent dividend payments often reflect the company's financial stability and ability to generate steady cash flows, which can be appealing to long-term investors.

SMA Solar Technology has not consistently paid dividends over the past 25 years. The data covers the years from 2006 to 2023, a period of 18 years. Within this timeframe, dividends were paid for only 9 of those years, and there were several years with zero dividend payments. This irregularity in dividend payments could indicate periods of financial instability or strategic reinvestment phases. The absence of dividends, particularly from 2014 to 2018, and partially in 2020 and 2022, raises questions about the company’s capacity to generate profits consistently. Therefore, it is evident that SMA Solar Technology does not meet this criterion favorably, suggesting potential concerns for dividend-focused investors who prioritize long-term income stability.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases can indicate a company's confidence in its financial health and a pro-shareholder approach. Consistent repurchases over a long period, such as 20 years, is a good sign for dividend investors.

SMA Solar Technology (S92.DE) has not repurchased any of its shares over the past 20 years, as the number of shares remained constant at 34,700,000 from 2006 to 2023. This static trend implies that the company has not used share buybacks as a mechanism to return surplus capital to shareholders. While this is neither inherently good nor bad, it suggests that SMA Solar Technology may be focusing its financial resources elsewhere, possibly on reinvestment in growth or paying down debt. Thus, for investors specifically looking for companies with a history of share buybacks as a sign of financial robustness and shareholder value, SMA Solar Technology might fall short of this criterion.