Last update on 2024-06-27

SBA Communications (SBAC) - Dividend Analysis (Final Score: 5/8)

Analyze SBA Communications' (SBAC) dividend policy, performance, and stability using an 8-criteria scoring system. Final Score: 5/8.

Short Analysis - Dividend Score: 5

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

The dividend analysis for SBA Communications (SBAC) evaluates its performance based on eight criteria. While SBAC has shown positive trends in dividend growth and payout ratios since they started paying dividends in 2019, their yield remains below industry average and dividend history is shorter than the stipulated 25 years. EPS and cash flow coverage have improved recently, suggesting better financial health. However, volatility in some criteria like annual growth rate and payout ratios during certain years suggest caution. Stock repurchase activity shows mixed results—more consistent in recent years but unsatisfactory in the long-term view.

Insights for Value Investors Seeking Stable Income

SBAC demonstrates a commitment to increasing and sustaining its dividends recently and shows potential for future growth, especially if positive cash flow trends continue. However, for those who heavily prioritize long-term stability and higher-than-average dividend yields, other stocks with more established dividend histories may be more suitable. SBAC might be worth considering for growth-oriented investors willing to accept some risk in exchange for the potential upsides.

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 is important as it shows how much a company pays out in dividends relative to its stock price, indicating the income investors might earn.

The current dividend yield for SBA Communications (SBAC) is 1.34%, notably below the industry average of 3.83%. Historically, SBAC did not offer dividends until 2019. Since then, its dividend yield has grown from 0.31% to 1.34%. This trajectory shows a positive trend for SBAC, depicting a commitment to returning value to its shareholders. However, with its yield remaining below the industry average, SBAC may not be attractive to yield-focused investors. The company's capital appreciation potential may offset these lower yields as indicated by significant stock price growth—from $3.76 in 2003 to $253.69 in 2023.

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

Explain the criterion for SBA Communications (SBAC) and why it is important to consider

The criterion of a Dividend Growth Rate being higher than 5% over the last 20 years is aimed at evaluating the sustainability and appeal of the company's dividends to investors. Higher growth rates in dividends can signal a company's confidence in its profitability and long-term financial health, making the stock more attractive for income-focused investors. In the case of SBAC, the data shows a radical fluctuation with a significant dividend in 2020 but drastic cuts in subsequent years. This inconsistency suggests volatility rather than stable growth, casting doubts on the sustainability of a 5% growth rate. While the average dividend ratio stands at 10.391176190476191, it's heavily skewed by the 2020 spike, thereby failing to consistently meet the 5% growth criterion over two decades. Therefore, this trend can be considered bad for long-term income-focused investors.

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

Average payout ratio measures the proportion of earnings a company pays to its shareholders in dividends. Keeping it below 65% ensures sustainability.

SBA Communications (SBAC) had an average payout ratio of 55.43% over the past 20 years. While this is under the 65% threshold, ensuring overall sustainability, significant spikes were observed in 2020 (860.71%) and 2021 (106.74%), followed by 2022 (66.45%) and 2023 (73.31%). These recent spikes indicate potential instability; however, as these may be outliers due to extraordinary circumstances, it’s crucial to delve deeper into specific reasons for this variance. The general trend leans towards a rational payout ratio, but recent anomalies warrant close inspection.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings when a company generates sufficient profit to pay dividends. An Earnings per Share (EPS) higher than the Dividend per Share (DPS) ensures sustainability.

Evaluating SBA Communications' (SBAC) earnings and dividend data from 2003 to 2023, it is revealed that for a significant portion of this period, the company reported losses (negative EPS). Only since 2016 did EPS turn positive, yet initially it wasn't sufficient to cover dividends. From 2019 onwards, we've seen EPS consistently outpace DPS: in 2019, coverage was 0.564, in 2020 it spiked to 8.61, in 2021 it was 1.07, in 2022 it stood at 0.66, and in 2023 it reached 0.733. The general trend indicates an improvement, particularly post-2019, reflecting better profitability and stronger earnings support for dividends. This trend is positive but further stability and consistency are essential to consider dividends well-covered long-term.

Dividends Well Covered by Cash Flow?

Explain what it means for a firm's dividends to be well covered by cash flow and the implications it has for its financial stability and investor confidence.

When assessing whether SBA Communications' (SBAC) dividends are well covered by cash flow, we look at the ratio of free cash flow to dividend payouts. A higher ratio suggests that the company generates enough cash from its operations to cover its dividend payments, which is a sign of financial health and sustainability. Analyzing the provided data, we observe the following percentages of dividend coverage by cash flow from 2003 to 2023. Starting in 2010, the dividend payout becomes apparent: * 2010: 6.1% * 2011: 0.59% * 2016: 13.84% * 2017: 12.42% * 2018: 11.90% * 2019: 10.39% This increasing trend continues strongly into the more recent years: * 2020: 20.82% * 2021: 24.01% * 2022: 28.64% * 2023: 28.29% These percentages indicate an improving ability to cover dividends with cashflow, strengthening from 0.06% in 2010 to over 28% in recent years. Such improvement enhances financial stability and boosts investor trust. The continuously increasing free cash flow also reassures that dividend payments can be maintained or even grown, a potential factor attractive to dividend-seeking investors. Overall, the trend indicates a positive outlook concerning dividend sustainability in SBA Communications.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years are fundamental for income-seeking investors to ensure a reliable income stream and financial predictability.

Analyzing SBA Communications' dividend per share over the last two decades, it is evident that dividends were non-existent until 2019, when dividends began at $0.74 per share, followed by $1.86 in 2020, $2.32 in 2021, $2.84 in 2022, and $3.4 in 2023. Over these few years, the dividends have increased consistently without any drop, far less a decrease exceeding 20%. Based on this data, we should not be able to find any year where the dividend dropped by 20%. Therefore, the interpretation of the evidence as indicating a drop by 20% is not plausible. This trend of consistent and rising dividends can be perceived positively as it shows a commitment from SBAC to its dividend payouts, marking it as dependable for income-seeking investors.

Dividends Paid for Over 25 Years?

Paying dividends consistently for over 25 years can indicate a stable and shareholder-friendly company.

SBA Communications (SBAC) does not meet the criterion of having paid dividends for over 25 years. According to the provided data, SBAC began paying dividends only in 2019, with a dividend payment of $0.74 per share. Subsequently, the dividends have steadily increased to $1.86 in 2020, $2.32 in 2021, $2.84 in 2022, and $3.40 in 2023. While the upward trend in dividends per share is promising and suggests that the company is making an effort to return value to shareholders, the lack of a 25-year history of dividend payments might be a drawback for investors seeking long-term dividend stability and reliability. Thus, this trend is positive in the short term but does not fulfill the specified long-term criterion.

Reliable Stock Repurchases Over the Past 20 Years?

Examining stock repurchases helps investors understand if a company is proactively managing its equity structure and returning value to shareholders.

SBA Communications (SBAC) shows mixed stock repurchase activity over the past 20 years. The company had notable repurchases in the years 2010, 2011, 2015-2022, suggesting a commitment to buy back shares and potentially increase shareholder value. However, the overall number of shares outstanding has generally increased from 52.2 million in 2003 to 108.2 million in 2023. This indicates periods of share issuance outweighing repurchases. The average buybacks per year are around 4.116 million shares. While the repurchase trend appears favorable recently, the earlier years show significant dilution. This mixed trend points to a moderately favorable but not extremely reliable repurchase pattern over two decades.