Last update on 2024-06-27

Schnitzer Steel Industries (SCHN) - Dividend Analysis (Final Score: 5/8)

Assessing Schnitzer Steel Industries (SCHN) dividend policy based on 8 criteria. Final score: 5/8 highlights the strengths and weaknesses for dividend investors.

Short Analysis - Dividend Score: 5

We're running Schnitzer Steel Industries (SCHN) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Schnitzer Steel Industries (SCHN) uses 8 criteria to assess the company's dividend performance and stability. SCHN received a dividend score of 5, indicating mediocre performance. The key takeaways are as follows: 1. **Dividend Yield**: SCHN's yield of 1.5628% is lower than the industry average of 2.98%, showing considerable volatility. 2. **Annual Dividend Growth Rate**: The dividend per share shows significant fluctuations with no consistent 5% annual growth. Many years had zero dividends, and there was a spike to 754.4118 in 2012 with a subsequent negative value in 2023. 3. **Average Annual Payout Ratio**: SCHN’s payout ratio is -4.29%, due to negative values in several years, signaling instability. 4. **Dividend Coverage by Earnings**: The ability to cover dividends with earnings is inconsistent, showing volatile trends with several years of negative EPS. 5. **Dividend Coverage by Cash Flow**: Cash flow to dividend ratio also shows inconsistency but has improved in recent years, despite some negative years. 6. **Dividend Stability**: Generally stable payouts except for a significant 50% drop in 2023, affecting investor confidence. 7. **Dividend Payment Longevity**: SCHN has a consistent history of paying dividends for over 25 years. 8. **Stock Repurchases**: Regular buybacks over 20 years indicate a commitment to shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Schnitzer Steel Industries (SCHN) shows some signs of long-term stability and commitment to shareholder value, but with notable inconsistencies in their dividend policies. The recent sharp reduction in dividends and past volatility should be a caution for dividend-focused investors. While the company has a consistent history of dividend payments and stock repurchases, its erratic performance in yield and payout ratios may suggest looking for more stable alternatives if constant income is the primary goal. It might be worth keeping on watch for potential improvements, but careful monitoring is advised.

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

Schnitzer Steel Industries' (SCHN) dividend yield of 1.5628% is significantly lower than the industry average of 2.98%. Historically, their dividend yield has experienced considerable volatility. For example, between 2010-2013, SCHN's dividend yield fluctuated significantly, reaching a peak of 5.2331% in 2015 but recently has been underperforming against the industry average. This discrepancy may not be favorable for income-focused investors.

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

The dividend growth rate criterion looks at the yearly increase in dividends per share over an extended timeframe, in this case, 20 years. A consistent growth rate above 5% suggests that the company is capable of generating increasing returns for its shareholders and reflects positively on its economic stability and future earnings potential.

Looking at the provided data for Schnitzer Steel Industries (SCHN), the dividend per share exhibits significant volatility over the past 20 years. Notably, there are multiple years with zero dividends, and there is a particularly anomalous spike to 754.4118 in 2012, followed by a negative value in 2023. This inconsistency is concerning when evaluating the dividend growth rate. Observing the long-term growth, we can't establish a consistent 5% annual increase. High peaks and deep troughs indicate ineffectiveness or potential difficulty in maintaining stable dividend policies. Thus, SCHN does not meet the criterion for a consistent dividend growth rate greater than 5%. This erratic trend is negative for long-term income-focused investors.

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

A payout ratio below 65% is generally considered sustainable, indicating that the company retains enough earnings to manage debt, reinvest in business, and buffer against future downturns.

The average payout ratio for Schnitzer Steel Industries (SCHN) over the last 20 years stands at approximately -4.29%, which is well below the threshold of 65%. This exceptionally low average is largely due to several negative payout ratios in the data. Negative payout ratios typically occur when a company is incurring losses, thereby unable to pay dividends. Years such as 2009, 2013, 2015, 2016, and notably 2020 saw extreme negative values, affecting the overall average negatively. Despite some years showing abnormally high payout ratios (like 342.753% in 2014), the overarching trend showcased negative values contributing a lower average. For a dividend-focused investor, a low and erratic payout ratio could flag inconsistency and financial instability, signaling caution.

Dividends Well Covered by Earnings?

The criterion checks if the company's earnings are sufficient to cover its dividend payouts, ensuring financial sustainability.

Examining the Earnings per Share (EPS) and the Dividend per Share (DPS) of Schnitzer Steel Industries from 2003 to 2023 reveals an inconsistent trend in the company's ability to cover its dividends. For instance, in 2009, the EPS was -$1.1445, which does not cover the dividend of $0.068 per share, highlighting a negative earnings cover ratio. Conversely, in 2010 the EPS improved to $2.3715 leading to a more robust coverage ratio of 0.0287. These fluctuations indicate volatility in earnings, impacting the sustainability of dividend payments. The company's earnings failed to cover dividends in years like 2009, 2013 (where significant negative EPS was seen), and 2016. This inconsistency is not favorable for investors looking for reliable dividend streams, despite the company's higher earnings in certain years such as 2008 ($8.6067 EPS) and 2021 ($5.6559 EPS) boosting better coverage in those periods. The abrupt changes make it difficult to predict future dividend coverage, posing potential risks.

Dividends Well Covered by Cash Flow?

Dividends well-covered by cash flow means the company's free cash flow is sufficient to cover its dividend payments. It is an indicator of financial health and sustainability.

A deep dive into Schnitzer Steel Industries (SCHN) reveals that the company had fluctuating success in covering its dividend payments with free cash flow. For instance, in years like 2003 and 2004, the ratios were extremely low at 0.098 and 0.040 respectively, suggesting that free cash flow was barely sufficient to cover dividends. This is not an ideal scenario as it indicates potential stress on financial stability. Significant improvements were observed in recent years, with ratios of 0.411 and 0.490 in 2019 and 2020 respectively. This trend indicates a robust improvement in covering dividends. However, a ratio less than 1 implies that the company must prudently manage its cash flows to ensure sustainability without impacting growth. Neglecting any year, particularly in 2013 where the coverage was negative (-0.392), can indicate operational or financial issues during that period. Given the inconsistency, it is advisable for investors to remain cautious and closely monitor Schnitzer Steel’s cash flows vis-a-vis its dividend payouts.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is crucial for income-seeking investors.

Over the past 20 years, Schnitzer Steel Industries (SCHN) showed general stability in dividend payments until 2022 and a notable reduction in 2023. Except for 2023, SCHN maintained or increased its payments steadily, exceeding income investors' expectations. The significant dip in 2023, reducing dividends from $0.752 to $0.376, represents a more than 50% drop, which is detrimental to its perception of dividend stability. Income-focused investors rely on consistent payments, and such a sharp decline raises concerns regarding future income predictability from SCHN.

Dividends Paid for Over 25 Years?

The consistency of dividend payment over a period exceeding 25 years is a key indicator of financial stability and sustainable shareholder value.

Schnitzer Steel Industries (SCHN) has consistently paid dividends from 1998 to 2023, totaling over 25 years. This uninterrupted dividend payment trend showcases the company’s commitment to returning value to shareholders and its capability to generate steady cash flows despite economic fluctuations. The data shows a gradual increase in the dividend per share, particularly noticeable around 2012 when it jumped from $0.068 to $0.581 and subsequently to $0.752, marking a period of strong growth before settling at $0.376 in the latest data. This consistent history of dividend payments bodes well for investors seeking long-term value and stability, although the recent reduction in 2023 suggests a potential need to review the company’s near-term financial strategies.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are essential as they demonstrate a company's commitment to returning cash to shareholders and often signal strong financial health.

Schnitzer Steel Industries (SCHN) has repurchased shares consistently across a span of 20 years, with significant activity noted during 11 out of these 20 years—2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2019, 2020, and 2023. While the overall average repurchase rate stands at approximately 3.88%, there is a trend of varied buyback effort. Between 2006 and 2013, consistent repurchases align with favorable market conditions and internal financial stability. However, the larger number of repurchased periods in the recent years—2019, 2020, and 2023—indicate resilience and a forward approach towards shareholder value. Despite some fluctuations in total shares outstanding, this represents a favorable trend signaling sustained efforts in shareholder value maximization. Hence, the stock repurchase trajectory of SCHN can be deemed healthy and purposeful.