Last update on 2024-06-27

Sandy Spring Bancorp (SASR) - Dividend Analysis (Final Score: 5/8)

Detailed analysis of Sandy Spring Bancorp's (SASR) dividend performance using an 8-criteria scoring system. Final score: 5/8.

Short Analysis - Dividend Score: 5

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

Sandy Spring Bancorp (SASR) was assessed on 8 criteria related to its dividend policy. Here's a summary of each point: 1. **Dividend Yield**: Currently lower than the industry average (2.4963% vs. 2.76%) with past fluctuations. Immediate income potential appears lower compared to peers. 2. **Dividend Growth Rate**: Average of 35.13% over 20 years but inconsistent, showing volatility with significant outlier years. Indicates an unstable dividend policy. 3. **Payout Ratio**: Average payout ratio of 37.1%, below the 65% threshold, signifying a conservative dividend approach and disciplined financial management despite some exceptional years. 4. **Dividend Coverage by Earnings**: Earnings per share (EPS) showed volatility, and in some years, coverage was inadequate. Indicates a risky but potentially rewarding policy, requiring cautious investor consideration. 5. **Dividend Coverage by Cash Flow**: Fluctuating but generally positive trend with a consistent improvement in recent years. Signifies a positive outlook but needs deeper analysis given past variability. 6. **Stable Dividends**: Given financial challenges like the 2008 and 2020 market downturns, dividends mostly remained stable without significant reductions. 7. **Dividend Payment History**: Paid dividends consistently from 1998 to 2023, a strong positive indicator of reliability. 8. **Stock Repurchases**: Sporadic repurchases, indicating unreliable commitment towards share buybacks. The overall Dividend Score given was 5.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Sandy Spring Bancorp shows signs of both strengths and weaknesses. The company has a strong history of dividend payments and maintains a conservative payout ratio. However, the inconsistencies in dividend growth and coverage by earnings are red flags. Additionally, dividend yield is lower than the industry average, and the reliability of stock repurchasing is questionable. Therefore, while there are positive aspects, potential investors should proceed with caution. It would be beneficial to explore other companies with more stable and higher yields.

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?

Assessing the dividend yield, which is the dividend income per dollar invested in the stock, is important as it shows the annual return on an investment from dividends alone, allowing comparison with other dividend-paying stocks.

Sandy Spring Bancorp's current dividend yield of 2.4963% is noticeably lower than the industry's average of 2.76%. Historically, SASR has shown fluctuating dividend yields with peaks during market downturns like 2008 (4.3976%) and 2020 (3.7279%). Despite a robust climb in yield during market stresses, the present yield is uninspiring relative to peers, indicating investors might find better immediate income opportunities elsewhere in the industry. For 2023, the stock closed at $27.24, showing a subdued yield despite a general trend of increasing dividends per share, now halved to $0.68 due to lower investor confidence reflected in the reduced share price. The sustained weakness in the stock price could signal potential concerns about future dividend growth, relative to historic norms or industry trends.

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

The Dividend Growth Rate indicates how much the company's dividend payments have increased over time, a key factor for income-focused investors.

Upon examining the dividend growth ratio for Sandy Spring Bancorp (SASR) over the last 20 years, it's evident that the values exhibit significant volatility. The average dividend ratio stands at approximately 35.13%, which appears robust. However, there are several outlier years with extreme values, such as 2009 (-61.46%), 2010 (-89.19%), and 2011 (750%), which deviate drastically from the average. These anomalies suggest periods of significant dividend cuts or extraordinary payouts, which might have been influenced by economic recessions or extraordinary conditions. Despite some years showing strong growth figures, the inconsistency in dividend growth ratios implies a potentially unstable dividend policy. Hence, while the average seems to be healthy, the unpredictable patterns might be a red flag for risk-averse dividend investors. The trend of fluctuations makes the sustainability of the dividend growth rate questionable and could be considered a negative point for long-term income stability.

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

The average payout ratio measures the proportion of earnings a company pays to shareholders in dividends. A lower payout ratio indicates a healthy balance between paying dividends and retaining earnings for growth.

The average payout ratio of Sandy Spring Bancorp (SASR) over the last 20 years is 37.1%, which is substantially lower than the 65% threshold. This suggests that the company has maintained a conservative approach to dividend distribution, ensuring sufficient earnings are retained for potentially profitable reinvestments and growth. There have been occasional spikes, such as in 2004 (79.6%) and 2008 (99.6%), but these seem to be anomalies rather than the norm. The negative payout ratio in 2009 and near-zero values in 2010 and 2023 also warrant attention, possibly indicating exceptionally tough economic periods or strategic financial adjustments. Overall, this trend is favorable for long-term sustainability and suggests disciplined financial management.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The Earnings Per Share (EPS) for Sandy Spring Bancorp have shown volatility over the period from 2003 to 2023. The Dividend Per Share (DPS) has generally increased but also demonstrates some volatility. In years where EPS has declined sharply or even turned negative (e.g., 2009, 2023), the coverage ratio of dividends by earnings becomes inadequate, as observed from negative or zero values. Ideally, a stable company should have a coverage ratio greater than 1. The best years in terms of coverage see EPS being 0.4 to slightly above 0.5 times the DPS, though not optimal, it suggests that SASR has sustained its dividend payments despite fluctuating earnings. This trend indicates a risky yet potentially rewarding dividend policy. Investors should be cautious, particularly when considering years with high volatility in EPS, as dividend coverage could be compromised. Stability is crucial for assessing the sustainability of dividend payments.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow. This criterion assesses the company's ability to generate sufficient cash flow to support its dividend payments. A higher ratio of free cash flow to dividend payout amounts indicates a stronger capability to cover dividends, suggesting financial stability and less reliance on borrowed funds or retained profits for dividend payouts. It is crucial to investors because a healthy cash flow coverage implies the sustainability of dividend payments, which is an important source of income for dividend-focused investors.

Analyzing the ratio of free cash flow to dividend payout amounts over the period from 2003 to 2023, we observe a fluctuating, albeit mostly positive trend. Years such as 2004 (1.247), 2009 (0.422), and 2014 (0.426) demonstrated strong coverage, signifying the company's robust ability to support its dividends from its operating cash flows. Conversely, years like 2010 (0.086) and 2011 (0.130) presented weaker coverage, indicating a potential concern. The consistent improvement in later years, such as 2021 (0.295) and 2022 (0.304), although not exceptionally high, suggests a steady recovery. On balance, while Sandy Spring Bancorp (SASR) has faced challenges in consistently covering dividends through cash flow, the improving trend in recent years indicates a positive outlook, though investors should consider the variability as a flag for deeper analysis.

Stable Dividends Since the Company Began Paying Dividends?

the criterion for Sandy Spring Bancorp (SASR) and why it is important to consider

Stable dividends are crucial for income-focused investors because they provide a reliable income stream year after year. For Sandy Spring Bancorp, evaluating the stability of dividend payments over 20 years involves ensuring that dividend per share hasn't dropped by more than 20% in any year, which signals resilience and reliability in dividend policy.

Dividends Paid for Over 25 Years?

Assessing whether a company has a history of paying dividends for over 25 years is crucial in determining its reliability and commitment to returning value to shareholders.

Sandy Spring Bancorp (SASR) has consistently paid dividends from 1998 to 2023, which amounts to a 25-year uninterrupted dividend history. This trend is a very positive indicator of the company's robustness and its commitment to rewarding shareholders. Although some years like 2009 and 2010 saw significant decreases or minor dividends due to broader economic challenges, such as the financial crisis, the company managed to recover and continue its dividend payments. This long-term commitment to dividends supports investor confidence in SASR's stability and long-term profitability.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Sandy Spring Bancorp (SASR) and why it is important to consider

The number of shares for Sandy Spring Bancorp (SASR) in the last 20 years shows fluctuating values, with several notable increases and decreases. A detailed look at the share count data shows an increase in shares from 2003 (14,709,174) up to 2021 (46,691,000). Significant jumps are visible in years like 2010 (22,270,513) and 2015 (24,697,908). Reliable share repurchase years are identified as 2004, 2015, 2016, 2019, 2022, and 2023, with the average repurchase over this period being approximately 1.4418. This trend indicates that there have been only a few occasions of consistent share repurchases. Despite the increase in shares over time, it's essential to recognize that repurchasing shares is a critical strategy for companies as it can signal to investors that the company believes its stock is undervalued and wants to return value to shareholders. However, given the sporadic repurchase activity, the overall reliability of Sandy Spring Bancorp in consistently executing stock repurchases can be questioned, particularly in the context of elevating shareholder value and improving financial metrics per share. In this context, the company's efforts in share repurchases appear lackluster, which might not be a positive signal for investors looking for consistent and regular returns in the form of buybacks.