Last update on 2024-06-28

Sinclair Broadcast Group (SBGI) - Dividend Analysis (Final Score: 6/8)

In-depth analysis of Sinclair Broadcast Group (SBGI) shows a stable dividend policy with a 6/8 score using an 8-criteria system. Ideal for dividend investors.

Short Analysis - Dividend Score: 6

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

Here's a summary of the dividend analysis for Sinclair Broadcast Group (SBGI): Their current dividend yield of 3.8373% is higher than the industry average, though it has been highly volatile over the past 20 years. However, their dividend growth rate has not consistently been above 5%, showing instability. The company's average payout ratio is a safe 32.63%, meaning they don't pay out too much of their earnings. However, some years have shown problems with dividend coverage by both earnings and free cash flow, indicating periods of unsustainability. SBGI's dividend history has had several inconsistencies, meaning dividends are not stable each year. They also have not paid dividends for over 25 years but have consistently buy backed stock over the past two decades, offering another form of returning value to shareholders.

Insights for Value Investors Seeking Stable Income

My recommendation is to be cautious about investing in Sinclair Broadcast Group (SBGI) for dividend income. While their current yield is attractive, the high historical volatility and inconsistent dividend payments pose significant risks. Additionally, although their payout ratio is low and they engage in frequent stock buybacks, the periods of poor dividend coverage by earnings and cash flow may indicate potential financial instability. If you're a conservative dividend investor focused on consistency and long-term stability, you might want to look elsewhere. However, if you are comfortable with some risks and variability, SBGI's higher-than-average yield and stock buyback policies could still make it a worthwhile investment.

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 represents the annual dividend payment to shareholders as a percentage of the stock's current price.

Sinclair Broadcast Group (SBGI) showcases a current dividend yield of 3.8373%, surpassing the industry average of 2.78%. Over the past 20 years, the company's dividend yield has been highly volatile, peaking at an extraordinary 25.8065% in 2008 and hitting a low of 0% in several years, such as 2003 and 2009. Despite these fluctuations, the more recent trend places SBGI above the industry average, which can be seen as attractive for dividend-focused investors. However, the variability over the years reflects some risk, as consistency in dividend payments is often a key factor for long-term investment strategies. The recent yield being higher than the industry average is a good sign, especially when combined with a relatively moderate stock price of $13.03 in 2023. Nonetheless, prospective investors should weigh the historical volatility carefully against current opportunities.

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

The criterion examines whether the Dividend Growth Rate is higher than 5% over the last 20 years. This is important as it showcases the company's ability to provide sustained dividend growth, instilling confidence in long-term investors.

Analyzing the provided dividend per share ratio data for Sinclair Broadcast Group (SBGI), it's apparent that the dividend growth rate has not consistently been above 5% over the past two decades. The average dividend ratio of 22.18% is misleading due to extreme fluctuations, including negative values in years like 2009 and 2023 (-100% and -50%, respectively). While there were years of high dividend growth, significant reductions and periods where no dividends were paid suggest instability. Consequently, this trend is unfavorable for investors seeking reliable and stable dividend growth.

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

A payout ratio lower than 65% indicates that a company is not overly aggressive in returning earnings to shareholders in the form of dividends, which suggests financial stability and room for reinvestment.

Sinclair Broadcast Group's (SBGI) average payout ratio over the last 20 years is approximately 32.63%, significantly below the 65% threshold. This conservative approach in dividend payout is generally seen as positive as it suggests that SBGI prioritizes financial stability and has ample room for reinvestment in growth opportunities or to weather economic downturns. Of note, the payout ratio does fluctuate, occasionally stepping beyond the typical range (e.g., in 2007 and 2019), but these appear to be outliers potentially linked to extraordinary financial activities or one-time charges, given the isolated nature of such spikes.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

In order to assess whether Sinclair Broadcast Group (SBGI) maintains sustainable dividend payouts, we need to compare the dividends per share to the earnings per share over time. A higher ratio above 1 indicates that the company is paying more in dividends than it earns, which could be unsustainable in the long run. Conversely, a ratio below 1 suggests that the earnings adequately cover the dividend payments, indicating a healthier financial status. From 2003 to 2023, there have been fluctuations in SBGI's earnings per share, complicating the sustainability of its dividend payouts. In 2007, for example, the earnings coverage ratio was above 1.26, suggesting that dividends were well covered. However, years such as 2008, 2020, 2021, and 2023 show negative ratios, indicating periods where earnings were negative, rendering dividend payments unsustainable temporarily. These negative earnings points in particular suggest vulnerability since the company paid dividends despite losses. The years with very low or negative ratios, especially extensively negative numbers in 2008 and 2020, coupled with high earnings and positive although low ratios should be alarming. Despite the periodic spike in earnings like in 2022, issuing dividends such as in 2023 has presented unsustainable maturity. Generally, even positive trends show mostly coverage under 1 implying Sarelli payout reliance on Cassandra earnings that should alert future investors.

Dividends Well Covered by Cash Flow?

Examining how well dividends are covered by free cash flow is essential as it indicates a company's ability to sustain its dividend payments without resorting to external financing or depleting cash reserves.

From 2003 to 2023, Sinclair Broadcast Group has shown variability in its free cash flow (FCF) which in turn influences how well dividends are covered by cash flow. For instance, during strong FCF years like 2019 ($760 million), the dividend coverage was healthy at 13.94%. However, in years with negative FCF like 2012 and 2013, dividend coverage was negative (-13.14% and -6.39%, respectively). Though there were improvements in coverage in certain years, the overall trend highlights instability. Years showcasing better coverage ratios such as 2011 (38.07%) should be the standard, suggesting improvements in financial strategy are needed to maintain consistent dividend coverage. To enhance investor confidence, Sinclair must aim for higher and more stable coverage ratios. Therefore, while some years indicate good trends, the frequent dips show inconsistency, which is concerning for long-term dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over 20 years indicate the company's financial health and commitment to returning value to shareholders.

Sinclair Broadcast Group's dividend history reveals some fluctuations. Notably, in 2008, dividends dropped to zero, and in 2009 and 2019, there were significant variations. However, there were years such as 2022 to 2023 where there was a noticeable reduction of approximately 50%. This indicates inconsistency in dividend payouts, which might concern income-seeking investors looking for stable models.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years

The payment of dividends consistently over a long period can indicate a company's financial stability and its commitment to returning value to shareholders. Companies with a long history of dividend payments, like 25 years or more, are often considered safe and reliable investments. This criterion is valuable for conservative investors who prioritize income stability from their investments.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Sinclair Broadcast Group (SBGI) has engaged in stock repurchases over the past 20 years with considerable consistency. The years in which the company bought back its stock include 2004, 2005, 2009, 2011, 2015, 2016, 2019, 2020, 2021, 2022, and 2023. Notable reductions in shares outstanding are seen in these years, confirming the trend. For instance, between 2008 and 2009, the share count dropped from 92,070,000 to 79,981,000, signifying a significant buyback. Similarly, recent reductions can be seen from 2019 to 2023, where the number of outstanding shares decreased from 92,015,000 to 65,125,000. This trend indicates a robust commitment to returning value to shareholders. The average repurchase rate of -1.136 underscores this consistent effort at share count reduction. Overall, these continuous repurchases highlight a dedication to enhancing shareholder value.