Last update on 2024-06-27

Sealed Air (SEE) - Dividend Analysis (Final Score: 6/8)

Explore Sealed Air's (SEE) dividend performance using an 8-criteria system, scoring 6/8, focusing on stability, growth, and payout ratios.

Short Analysis - Dividend Score: 6

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

Sealed Air (SEE) got a score of 6 out of 8 in the dividend analysis. Here's a brief rundown: 1. **Yield vs. Industry**: This year's yield is 2.19%, which is lower than the 2.77% industry average. This might not attract income-focused investors. 2. **Growth Rate**: Average dividend growth rate is 5.13%, which is just above the 5% target but inconsistent over years. 3. **Payout Ratio**: It has been about 29.28%, much below the 65% threshold, which is good. 4. **Covered by Earnings**: The dividends are well-covered with a ratio of 2.96 in 2023. 5. **Covered by Cash Flow**: The company struggles here with an average ratio below 1, raising concerns for future dividend payments. 6. **Stability**: Consistent dividends since 2006, growing reliably even during financial crises. 7. **25-year Record**: Has paid dividends for 17 years, not meeting the 25-year benchmark but still good. 8. **Stock Buybacks**: The company has been buying back stocks reliably.

Insights for Value Investors Seeking Stable Income

Sealed Air (SEE) seems decently robust for dividend-focused investors. Its stable payout history since 2006 and strong earnings coverage are big pluses. However, the below-average industry yield and insufficient cash flow cover might be red flags. Consider it if you can tolerate some risk and prioritize reliable (but not exceptional) growth and stock buybacks. Not ideal if you need a long 25-year history or higher-than-industry 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?

dividend yield

The dividend yield of Sealed Air (SEE) over the last 20 years has shown considerable fluctuation. Notably, years like 2008, 2009, and more recently 2023, exhibited higher yields—3.2129%, 2.1958%, and 2.1906% respectively. However, it's important to acknowledge that the current yield of 2.1906%, although higher than the historical norms for the company, remains below the industry average of 2.77%. This trend might not favor income-focused investors since it indicates SEE's dividend yield is lagging behind its peers. Examining SEE's stock price and dividends, it's evident that while the dividends per share have increased from $0.48 in 2008 to $0.8 in 2023, the stock price closing in 2023 lower at $36.52—significantly down from earlier peaks—likely impacts the yield adversely. This trend is worrisome as investors might prefer other firms offering higher yields within the industry.

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

The Dividend Growth Rate measures the annualized percentage rate at which dividends per share grow over a specific period. A growth rate higher than 5% suggests an increasing trend in shareholder returns, indicating a profitable and stable company.

Analyzing Sealed Air (SEE) from 2003 to 2023, we see fluctuating dividend increases with significant rates in certain years (example: 33.3333% in 2007 and 20% in 2008). Nonetheless, years with zero growth or decreases are frequent, demonstrating inconsistency. The average dividend ratio is 5.13%, slightly over the 5% target, but with the uneven trend, it underlines issues in maintaining steady growth. Less consistent dividend growth may indicate underlying business instability or varying profitability phases. This trend is thus borderline, suggesting concerns over sustained dividend increases.

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

A payout ratio lower than 65% indicates that a company retains a significant portion of its earnings to reinvest in the business, indicating financial health and potential for sustainable dividend growth.

Sealed Air (SEE) has maintained an average payout ratio of approximately 29.28% over the last 20 years, significantly below the 65% threshold. This is a positive indicator as it suggests the company manages to return value to shareholders while retaining ample earnings for reinvestment. Notably, anomalies such as the negative payout in 2012 (-7.1089) due to certain financial adjustments and the high payout in 2013 (89.3932) do not overshadow the general trend of maintaining a healthy payout ratio. Overall, this trend is favorable for Sealed Air's potential to sustain and grow dividends.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means the company generates sufficient profit to distribute dividends without sacrificing financial stability.

Examining the earnings per share (EPS) and dividend per share (DPS) trends for Sealed Air (SEE), it is clear that the dividend coverage ratio has fluctuated but remains an essential measure. A higher coverage ratio, typically above 2, indicates robust earnings relative to dividend payouts. For SEE, the coverage ratio has varied, with notable challenges in 2012 when EPS was negative, making the ratio non-meaningful. However, a positive trend in earnings is evident in recent years up to 2022, with EPS of 2.3657 in 2023 against a DPS of 0.8, yielding a coverage ratio of approximately 2.96, which is relatively strong. This indicates SEE's earnings sufficiently cover its dividend payouts, making it a reliable dividend stock from 2018 to 2023 with resilience to maintain its dividends.

Dividends Well Covered by Cash Flow?

Explain the criterion for Sealed Air (SEE) and why it is important to consider

Dividend coverage by cash flow is crucial as it indicates the company’s ability to sustain its dividend payout from operational cash generation. A ratio above 1 is ideal as it means the company generates more free cash flow than needed to cover its dividends, ensuring financial stability and potential for future dividend increases. In the context of Sealed Air (SEE), the average coverage ratio from 2003 to 2023 is below 1, indicating potential vulnerability in maintaining or increasing dividend payouts without impacting other business operations. Negative coverage in 2014 (approx. -0.31) points to periods where the sustainability was highly questionable.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividends over the past 20 years is crucial for Sealed Air as it reflects the company's ability to consistently return value to shareholders. Income-seeking investors rely on stable or growing dividend payments to ensure a steady income stream, particularly during economic downturns when other investment returns may be volatile.

Over the past 20 years, Sealed Air's dividend per share history shows that it initiated dividend payments in 2006, subsequent to which dividends have been fairly stable with consistent growth. However, the company did not pay dividends from 2003 to 2005. In 2006, Sealed Air initiated dividends at $0.3 per share and these payments have gradually increased, reaching $0.8 per share by 2022, although with stability at certain intervals (notably maintaining $0.52 from 2010 through 2016). The largest percentage drop happened before dividends initiated, which arose due to the global financial crisis in 2008 **(−14.29%)**, equating to an approximate decline in actual payments rather than percentage terms for earlier Harry Bronze stages. It appears that, particularly post-financial crisis (2008 onwards), Sealed Air maintained growth and has consistently avoided any drops exceeding 20%. Such performance provides credible reassurance to income-focused investors despite initial fluctuations. Overall, SEAL is demonstrating good dividend-stability for long-term investors, thereby indicating resilience amid Financial crises and eventually energizing reassurance to income-orientated investors.

Dividends Paid for Over 25 Years?

Dividends paid consistently for over 25 years demonstrate a company's commitment to returning value to shareholders and often indicate financial stability and strong cash flow management. It is essential for dividend-focused investors to assess such consistency to gauge long-term reliability.

According to the data provided, Sealed Air has only paid dividends since 2006, beginning with $0.30 per share and gradually increasing to $0.80 per share by 2023. This marks 17 consecutive years of dividend payments. While this demonstrates a strong commitment to returning value to shareholders for nearly two decades, it falls short of the 25-year criterion. The trend is still favorable for investors seeking stability and reliability, but those strictly looking for a 25-year track record may view this as a disadvantage. The gradual increase in dividends also underscores the company's solid growth, making it appealing for those valuing dividend increases over absolute longevity.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Sealed Air (SEE) and why it is important to consider

To evaluate Sealed Air's commitment towards returning value to shareholders, it's key to look at their historical stock repurchase trends. Stock buybacks can positively affect EPS (Earnings per Share) by reducing outstanding shares, thus serving as a strong indicator of financial health and management's confidence in the business. Sealed Air has shown instances of buybacks across various years, such as 2005-2007, 2009-2010, and consistently from 2015-2023.