Last update on 2024-06-27

Shore Bancshares (SHBI) - Dividend Analysis (Final Score: 4/8)

Shore Bancshares (SHBI) Dividend Analysis using an 8-criteria system unveils a moderate score (4/8) reflecting stability and performance with areas of concern.

Short Analysis - Dividend Score: 4

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

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 payments to shareholders as a percentage of the stock's price. It is crucial as it indicates how much income an investor can earn from their investment.

Despite a general downward trend over the past 20 years, Shore Bancshares' current dividend yield of 1.6842% is notably below the industry average of 2.76%. This low yield, especially when compared to its historical highs (e.g., 4.4138% in 2009), can make the stock less attractive to income-focused investors. The overall trend suggests inconsistency and lower payouts, which might be a red flag for potential investors. However, a lower yield could also indicate stronger stock price appreciation, as seen in other years where SHBI's yields were closer to the industry average. Still, the disparity between SHBI's yield and the industry average must be monitored closely to ensure sustainable future payouts.

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

The dividend growth rate calculates the annual percentage increase in dividends per share over a period, typically looking for consistency and a positive trend, which reflect company stability and shareholder value.

The Dividend Ratio data for Shore Bancshares exhibits significant volatility over the years. For instance, there are drastic drops such as -62.5% in 2009 and -88.8889% in 2011, periods of no dividends, and then a massive spike to 325% in 2016. The average dividend ratio of 6.67% is skewed by these large fluctuations. This erratic pattern indicates inconsistency in Shore Bancshares' dividend policy, which can be deemed undesirable for investors looking for reliable and steadily growing dividends. Bad: The overall trend does not meet the criterion of a consistent 5% growth rate over the past 20 years.

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

The average payout ratio as a benchmark indicates if the company maintains a sustainable dividend policy that balances dividend payments with earnings over a long period.

The average payout ratio for Shore Bancshares (SHBI) over the past 20 years is approximately 18.06%, which is well below the 65% threshold. This suggests that the company maintains a conservative and sustainable dividend policy, keeping ample earnings to reinvest in the business for growth or to cushion any downturns. The company has experienced fluctuations, notably higher ratios in 2009 and below zero from 2010 to 2012 due to likely financial difficulties or investment phases. These negative or zero payout ratios might suppress the average considerably. However, as of the latest year (2023), the payout ratio stands at 56.79%, indicating a restored and relatively healthy dividend policy, albeit approaching the higher end of the safe threshold.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings, which means the Earnings Per Share (EPS) is sufficient to cover the Dividend Per Share (DPS). Ideally, the company should have a payout ratio below 75%, suggesting that it retains a portion for growth and other operations.

Examining the data for Shore Bancshares (SHBI):\n\nFrom 2003-2007, Shore Bancshares maintained a payout ratio below or around 40%, indicating good coverage. Starting 2008, earnings declined and EPS could not cover the DPS, peaking negatively in 2009 at -1.215. This trend continued poorly through 2013, with EPS insufficient to cover DPS. It improved somewhat in 2014 and gradually strengthened to over 40% coverage from 2017–2019. However, 2022 showed a weak coverage ratio of 0.305, and 2023 rebounded slightly to 0.568. These fluctuations signify financial instability impacting dividend reliability, which is concerning for investors. Generally, trends show weak coverage with occasional recovery phases signifying financial uncertainty.

Dividends Well Covered by Cash Flow?

Ratio of free cash flow to dividend payout amount. It indicates if dividends are well-covered by the operational cash flow, protecting investors’ payouts.

When analyzing the data for Shore Bancshares (SHBI), it becomes immediately evident that their dividend coverage by free cash flow has displayed significant volatility over the provided period. The ideal scenario is when the ratio of free cash flow to dividend payout amount (FCF coverage ratio) remains consistently above 1.0, indicating that the firm's dividends are well-covered by its free cash flow. However, SHBI presents an inconsistent trend: From 2003 to 2009, the FCF coverage ratio ranges between 0.31 and 0.83, showing some level of coverage but not strong. A concerning dip occurs in 2010, plummeting to 0.09, signifying potential struggles in covering dividends. Notably, 2011 to 2013 were lean years with extremely low or negative coverage, implying severe challenges in dividend sustainability. Since then, while showing some recovery from 2014 - 2019, the ratios still show modest improvements rather than robust stability. 2020 stands out with a negative -0.60 ratio due to the free cash flow turning negative. However, by 2022 and 2023, significant improvement is noted with coverage ratios of 0.18 and 0.75 respectively, showing promising recovery. The inconsistency in these ratios points to fluctuating abilities in covering dividends from operational cash flows, invoking both attention and caution among investors regarding the sustainability and reliability of the dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over a 20-year period is a criterion income-seeking investors scrutinize to gauge consistency and reliability in returns, essential for long-term financial planning.

Examining Shore Bancshares (SHBI) dividends from 2003 to 2023, the company's dividend per share has experienced periods of fluctuation. The most notable decline occurred from 2008 to 2011, where dividends dropped from $0.64 to $0.01, including two consecutive years of no dividends (2012-2013). Although dividends were reinstated and saw growth post-2013, they did not return to pre-2008 levels. In 2023, the dividend per share was $0.24, representing a decrease from $0.48 in the previous years. Such volatility raises concerns over their stability, which could potentially deter income-focused investors. Therefore, based on these findings, SHBI fails to meet the criterion of stable dividends as there was a significant drop by more than 20% over the assessed period. While recent trends offer some recovery, the historical instability cannot be overlooked.

Dividends Paid for Over 25 Years?

This criterion evaluates whether a company has been paying dividends consistently for over 25 years, which is often a sign of financial stability and a commitment to returning value to shareholders.

The data indicates that Shore Bancshares (SHBI) has not consistently paid dividends for over 25 years. It began paying dividends in 2001 and has had multiple interruptions in its dividend payments since then, including zero dividends in 2000, 2013, 2014, and from 2013 to 2015. While the company has shown some resurgence in paying dividends, especially from 2017 onwards, the inconsistency does not meet the criterion of having continuously paid dividends for over 25 years. This trend is generally unfavorable for investors looking for stable and reliable dividend incomes.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases over the past 20 years indicate a company's capacity to return value to its shareholders by reducing the number of outstanding shares. This can boost earnings per share (EPS) and demonstrate strong capital management.

For Shore Bancshares (SHBI), the number of shares outstanding has shown a fluctuating trend. From 2003 to 2023, the outstanding shares increased from 8.19 million to 26.57 million. However, there were a few years where share repurchases were notable, such as 2007, 2008, 2019, and 2020. This inconsistency in share repurchase activity suggests that while SHBI has undertaken buybacks during certain periods, it has not been a regular strategy. From an investor's perspective, inconsistent share repurchases may raise concerns about SHBI's long-term commitment to returning value via buybacks. An average repurchase rate of around 6.864% over the last 20 years does show some efforts in buybacks, but the significant overall increase in shares suggests other actions, such as new share issuances, have diluted these efforts. Investors might perceive this as a mixed signal regarding SHBI's capital management strategy.