Last update on 2024-06-28

Societe Generale (SGE.DE) - Dividend Analysis (Final Score: 5/8)

Analyze the performance and stability of Societe Generale (SGE.DE) dividends with our comprehensive 8-criteria scoring system. Final Score: 5/8.

Short Analysis - Dividend Score: 5

We're running Societe Generale (SGE.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

In this analysis, we evaluate Societe Generale’s (SGE.DE) dividend performance and stability based on 8 criteria: 1. **Dividend Yield**: SGE.DE has a high dividend yield (7.0833%), surpassing the industry average (2.76%). 2. **Annual Growth Rate**: Despite an average annual dividend growth rate of 38.15%, major fluctuations indicate instability. 3. **Payout Ratio**: The uncertain average payout ratio of -5.61%, with occasional spikes above the 65% mark, suggests inconsistent sustainability. 4. **Earnings Coverage**: Dividend coverage by earnings per share (EPS) has been variable, showing potential concern for its consistency. 5. **Cash Flow Coverage**: The historical free cash flow coverage of dividends shows significant fluctuations, reflecting underlying financial instability. 6. **Dividend Stability**: While DPS didn't drop significantly by more than 20%, the overall stability over the years is questionable due to some inconsistencies. 7. **25-Year Dividend Payments**: Over the past 25 years, SGE.DE displayed inconsistent dividend payments, particularly during the financial crises. 8. **Reliable Stock Repurchases**: The trend for stock repurchases over 20 years has been inconsistent, with some positive signs in recent years.

Insights for Value Investors Seeking Stable Income

Given this analysis, Societe Generale (SGE.DE) presents a mixed picture for dividends. The high yield and recent stability are positive signals for income-focused investors, but the historical volatility and inconsistency in growth rate, payout ratio, coverage by earnings, and cash flow require caution. As a potential investor, you should carefully consider if the higher yield today justifies the unpredictable nature of its dividend history. For those looking for dependable returns and long-term stability, there might be more reliable options available.

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 ratio of a company's annual dividend compared to its share price, illustrating the income earned from investments.

Societe Generale's dividend yield of 7.0833% significantly surpasses the industry average of 2.76%. This higher yield indicates the company's robust dividend distribution compared to its industry peers. Over the past 20 years, the dividend yield has varied significantly, with peaks like 10.5932% in 2011 and 12.8987% in 2020. The trend shows resilience even during financial turbulences. However, dividend sustainability should be assessed in conjunction with payout ratios and earnings stability to ensure future consistency. Overall, a yield higher than industry average is a positive trend for income-focused investors.

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

The Dividend Growth Rate reflects how a company's dividend payouts have increased over a certain period, typically annually. It's important because a consistent and growing dividend can be a sign of a company's financial health and commitment to returning value to shareholders.

Analyzing the dividend ratio data from 2003 to 2023 for Societe Generale (SGE.DE), we see significant fluctuations. For instance, some extraordinary spikes in years such as 2009 (600%) and 2014 (122.22%), but also multiple negatives and zeros, such as in 2010 (-100%) and 2020 (-75%) respectively. This inconsistency indicates volatility, reflected in an average dividend growth rate of approximately 38.15%, seeming substantially high primarily due to outliers. Despite being above the 5% benchmark, this irregularity doesn't depict reliability nor a positive long-term dividend growth trend, hence bad for stability-seeking investors.

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

The average payout ratio is essential because it indicates what portion of earnings a company pays out as dividends. A lower payout ratio generally implies more sustainable dividends.

The analysis of Societe Generale (SGE.DE) for the last 20 years shows an average payout ratio of approximately -5.61%, which is a result of negative figures in 2020. Over this period, the payout ratio was below 65% for most years except in 2009 (110.9467%) and 2022 (74.3578%). These deviations suggest instability, with a particularly troubling negative payout in 2020. Thus, the trend indicates a mixed performance for dividend sustainability, with less predictability and potential concerns for investors relying on consistent dividends.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The coverage ratio of dividends by earnings per share (EPS) for Societe Generale (SGE.DE) demonstrates some significant volatility over the years. A coverage ratio less than 1 indicates that earnings are insufficient to cover dividends, which is visible in years like 2006, 2010, 2012, 2014, and most notably 2016 with a very disproportionate ratio of -7.25 in 2020, due to likely significant financial hardship. For years such as 2009, 2016, and 2017, coverage ratios are relatively better, reflecting that in those years, earnings were robust enough to cover dividend payouts more effectively. Having stable and high coverage is a good indicator of a company's ability to maintain its dividend payments, whereas inconsistent coverage ratios may raise concerns about sustainability. On a positive note, years like 2009 and 2014 to 2018 show capable earnings per share, sufficiently covering dividends, which implies financial strength during those periods. However, the considerable variability necessitates a cautious approach when projecting future dividend sustainability based solely on historical performance.

Dividends Well Covered by Cash Flow?

The dividend covered by cash flow is an essential measure indicating whether a company's free cash flow is sufficient to cover its dividend payments.

Upon examining Societe Generale's data from 2003 to 2023, it is noticeable that there were substantial fluctuations in the free cash flow, from a significant negative in 2008 (-€12.981 billion) to an impressive positive in 2020 (€75.17 billion). In terms of their effectiveness in covering their dividends, several years show low or negative coverage. For instance, the ratio took a steep downturn in 2008, 2012, and 2018 becoming negative, indicating unfavorable conditions—a combined consequence of high dividend payouts and lower cash flows. However, more recent years have shown improvement with positive (albeit low) coverage ratios (intermittent years saw coverage at 0.3817 in 2019 and 0.0465 in 2022). While low and inconsistent, the latter behavior signals some attempts at rebalancing, yet the generally low and negative ratios underscore underlying financial instability. Consistently healthy ratios in 2009 and slim yet surviving post-2016 recovery, show intermittent performance aligned more towards patch-ups than robust stability. This lukewarm trend casts shadow on Societe Generale's current robustness in using its free cash flow to consistently and fully honor dividend payouts.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividends is crucial because it reflects a company's financial health and reliability. Income-seeking investors prioritize consistent dividend payments, and a drop of more than 20% can indicate potential risks or financial instability.

Analyzing the dividend per share (DPS) of Societe Generale (SGE.DE) over the past 20 years, we notice some significant fluctuations. The DPS went from 0 in 2003 through 2007, increased to 0.9 in 2008, but fell again in 2011 to 0.25. We observe another drop to 0 in 2012. The more recent data shows relatively higher and stable values from 2013 to 2023, yet with drops to 0.55 in 2021 after maintaining 2.2 from 2016 to 2019. Despite these fluctuations, the interpretation indicates that the DPS did not drop by more than 20% in any single year. Therefore, we can conclude that while there were some inconsistencies in the dividend development, the company's dividend policy maintained a stability threshold that might be deemed acceptable to income-focused investors. Considering the upward trajectory in recent years, this trend seems promising for 2023 and beyond.

Dividends Paid for Over 25 Years?

Explain the criterion for Societe Generale (SGE.DE) and why it is important to consider

Societe Generale has been inconsistent with its dividend payments over the last 25 years. Notably, there were years, particularly in the early 2000s and during the financial crisis in the late 2000s, where no dividends were paid out. Since 2008, dividend payments per share fluctuated, with significant reductions post-crisis and during economic downturns like COVID-19. Although there has been some recovery in recent years, this inconsistency might raise concerns for investors seeking steady and reliable dividend income. A consistent dividend-paying record is generally more appealing as it signals financial stability and a steady income stream for investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are a sign that a company is committed to returning value to shareholders. It reflects strong financial health and management confidence in the company's future performance.

Over the past 20 years, Societe Generale (SGE.DE) has significantly fluctuated in its share repurchase activity. The notable repurchase years are 2021, 2022, and 2023, indicating a more recent trend of buybacks. The average repurchase rate is 2.8963, which, while showing some commitment, also reflects irregularity over the two decades. This inconsistent repurchasing activity suggests that while the company has recently been focusing on returning value to shareholders, its long-term commitment to this strategy has not been steady. Thus, although this recent trend is a positive sign, the historical inconsistency may concern long-term investors.