Last update on 2024-06-27

K+S (SDF.DE) - Dividend Analysis (Final Score: 3/8)

Analyze the dividend performance and reliability of K+S (SDF.DE) with an 8-criteria score of 3/8, offering insights into payouts and yield comparisons.

Short Analysis - Dividend Score: 3

We're running K+S (SDF.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of K+S (SDF.DE) indicates a fluctuating and unstable dividend history. Over the past 20 years, the company's dividend yield and dividend growth rates have been inconsistent, showing significant variability and periods of no dividends at all. The average payout ratio is slightly above the preferred threshold, and there have been years where dividends were not well covered by earnings or cash flow. Stability in dividends is an issue with several significant drops in dividend payments, and while the company has paid dividends for over 25 years, it has not been consistent. Stock repurchases have also been intermittent rather than consistent, indicating potential uncertainty.

Insights for Value Investors Seeking Stable Income

Based on the analysis, K+S (SDF.DE) may not be the best choice for investors seeking stable and reliable dividend income. The inconsistency in dividend payouts, coverage, and stock price performance presents a higher risk for those looking for steady returns. Investors might want to consider more stable alternatives with consistent dividend growth and payouts.

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 measures the annual dividends paid out by a company relative to its current stock price. This percentage indicates how much cash flow you are getting for each dollar invested in an equity position. Thus, a high dividend yield can be an indicator of a good investment for those seeking regular income streams, but it can also indicate potential risks if the company may not sustain such payments.

For K+S (SDF.DE), the current dividend yield is 6.9881%, which is lower than the industry average of 12.48%. This might appear negative at first, but it's imperative to examine the historical context. Over the last 20 years, K+S showcased significantly higher dividend yields in most earlier years, peaking at 19.3798% in 2003. However, this yield has fluctuated substantially, with hefty declines, hitting virtually zero in some years (ex: 2021). Notably, the company’s dividend yield rebounded from 1.0881% in 2022 to 6.9881% in 2023. There is evident volatility and inconsistency in dividend payment, suggesting underlying operational instabilities or strategic reinvestments. In contrast, the industry’s average, although also rising to a high at present, has been more consistent in its increments, which implies industry reliability. Considering the closing stock prices for K+S declining from a high of 56.36 in 2010 to 14.31 in 2023, these fluctuations indicate volatility and potential speculation-related drives. Evaluating dividends alongside stock prices and payouts (dividends per share fluctuating significantly), we witness a correlation between corporate performance and dividend yields. This uneven trend of K+S’s dividend yield underlines the crucial necessity of examining surrounding financial contexts over isolated yield percentages.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payments over time. A growth rate higher than 5% indicates that the company has been consistently increasing its dividend payouts, which can be attractive to dividend-seeking investors.

Based on the data provided, K+S (SDF.DE) shows fluctuating dividend growth rates over the past 20 years without a consistent upward trend. Several years have experienced negative growth, including significant drops in 2009 (-91.6667%), 2015 (-82.1429%), 2018 (-64.2857%), and 2021 (-100%). While years like 2011 and 2023 have shown spectacular growth rates (400.05% and 400% respectively), these are outliers rather than indicative of a stable trend. With an average dividend ratio of 43.924076190476185%, it’s important to note that this average obscures the volatility in yearly changes. Overall, the dividend growth rate for K+S does not appear stable or consistently higher than 5%, making it less attractive to those prioritizing steady dividend growth.

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

A payout ratio below 65% indicates healthy earnings retention, allowing for growth and stability. Long-term lower ratios also signify sustainable dividend policies.

K+S (SDF.DE)'s average payout ratio over the last 20 years is approximately 68.58%, which is slightly above the 65% threshold. Despite this slight overage, the trend is acceptable. High ratios, particularly in 2003 (174.09%), 2004 (127.60%), and major fluctuations including 2009 (411.73%) indicate volatility. Years with payout ratios below the threshold highlight periods of stability, but the company's ability to consistently maintain a payout ratio below 65% remains questionable. High volatility in payout ratios may concern risk-averse investors who prefer stable dividend policies. Cross-years with negative ratios (e.g., 2007 at -372.86% and 2019 at -2.12%) highlight instances of financial stress or losses. The recent payout ratio for 2023 stands at 89.10%, suggesting current strain in retaining earnings.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings is crucial because it indicates that a company generates enough profit to sustain its dividend payments to shareholders. This offers financial stability and reassures investors regarding the security of their income from dividends.

Over the years detailed, K+S (SDF.DE) exhibits varied ability in covering its dividend payouts with its earnings. There are critical years such as 2007, 2008, 2020, and 2021 where the Earnings Per Share (EPS) could not cover dividends at all or substantially (-3.73, 0.40, -0.02 and 0.00 respectively). However, positive coverages were seen in specific years, notably 2021 with a high EPS of 15.384 that significantly improved coverage despite a total halt in dividends payout due to adjustment or strategic calls, and in 2023 with 1.12 against 1. Nonetheless, inconsistency prevails, which signals risk for dividend income’s dependability in the long term.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow measures the ability of a company to pay its dividend from its free cash flow. This is important because it indicates financial health and sustainability; a company consistently paying dividends covered by cash flow suggests strong financial management and lowers the risk of cutting dividends in tough times.

The coverage ratio of K+S (SDF.DE) from 2003 to 2023 shows a mixture of trends. Starting with strong coverage ratios above 0.35 in many initial years, K+S faced large negative dips from 2012 to 2019, primarily due to negative free cash flow during those years. However, the most recent data for 2023 shows a positive coverage ratio of 0.5649, indicating an improved capability to cover dividends with free cash flow. While it is a positive trend, the negative dips raise questions about the consistency of financial management, suggesting the necessity for stakeholders to monitor free cash flow trends for future dividend safety.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments is important for income-seeking investors as it provides predictable and reliable income over time. A drop of more than 20% may indicate financial instability or poor management decisions.

Analyzing the provided data for K+S (SDF.DE) from 2003 to 2023, we notice several significant fluctuations in the dividend per share. Notably, there was a sharp drop in 2010 to €0.2, and similarly, in 2014, dividends plunged to €0.25 from the previous year’s €1.4. Moreover, in 2021, dividends were nonexistent at €0 after being €0.19 in 2020. These considerable decreases surpass the 20% threshold, raising concerns about the firm's financial stability and consistency in rewarding shareholders. Such volatility suggests underlying issues that might affect income-seeking investors who rely on dividend stability for predictable income.

Dividends Paid for Over 25 Years?

Consistency in paying dividends over a long period (e.g., 25 years) demonstrates a company's commitment to returning value to shareholders. It also indicates financial health and reliability, supporting investor confidence.

Over the last 25 years, K+S (SDF.DE) has paid dividends, albeit inconsistently, with several zero payouts particularly in earlier years (1998-2000), 2021, and fluctuating significant dips in 2010 and from 2015 to 2023. The company shows a varied dividend per share ranging from 0 to a peak of 2.4 in 2011. Such inconsistencies may suggest periods of financial instability, impacting its reliability as a dividend-paying stock. Despite this, more recent payments show improvement and greater stability which is a positive sign for shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to a company's consistent effort to buy back its own shares from the market, which can provide a signal to investors about the company's confidence in its own financial health and profitability. Steady repurchases can reduce share count, increase EPS (Earnings Per Share), and demonstrate good use of excess cash.

Over the last 20 years, K+S has engaged in stock repurchases in six distinct years: 2005, 2006, 2008, 2009, 2011, and 2023. The context for these repurchases is crucial as they often reflect management's confidence in the company's future prospects. In 2009 and more recently in 2023, these repurchases could signify positive prospects or strategic positioning. The average repurchase rate of 0.3616 indicates a moderate level of buybacks. However, the sporadic nature of these buybacks rather than a steady, predictable pattern could raise questions regarding the company's strategic approach to capital allocation. Therefore, while not entirely negative, the intermittent repurchase activity may suggest uncertainty or opportunistic buyback actions, which may not always convey long-term strategic confidence to investors.