Last update on 2024-06-27

Siemens Healthineers (SHL.DE) - Dividend Analysis (Final Score: 5/8)

Assess the performance and stability of Siemens Healthineers (SHL.DE) dividend policy using an 8-criteria scoring system with a final score of 5/8.

Short Analysis - Dividend Score: 5

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

Siemens Healthineers dividend analysis covers eight main criteria to measure its performance and stability. These criteria include evaluating if its dividend yield is higher than the industry average, maintaining an average annual growth rate over 5%, keeping its payout ratio under 65%, ensuring dividends are well covered by earnings and cash flows, maintaining stable dividends since beginning payouts, and examining if dividends have been paid out for over 25 years. Additionally, the analysis looks into whether the company has reliably repurchased shares over the past 20 years.

Insights for Value Investors Seeking Stable Income

Siemens Healthineers scored a 5 out of 8 in the dividend analysis, meaning there are some strong points but also significant areas for improvement. They have a higher dividend yield compared to the industry, a reasonably low payout ratio indicating potential for future growth, and their dividends are well covered by both earnings and cash flow. However, inconsistent past dividends, less than 25 years of dividend history, and unreliable stock repurchases are notable drawbacks. If you're looking for a stable dividend stock with a consistent long-term payout history, this may not be the best option currently. However, its better-than-industry yield and prudent payout ratio suggest it's worth considering for investors interested in potential future growth and current income.

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 is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. A higher dividend yield indicates a potentially higher income stream for investors.

The dividend yield of Siemens Healthineers has shown a notable trend over the years. From 0% until 2018, the yield increased to 1.6348% in 2019 and further peaked at 1.9057% in 2020. Despite slight fluctuations, it has maintained a relatively high level compared to the industry average, reaching 1.8061% in 2023, significantly higher than the industry average of 0.39%. This trend indicates that Siemens Healthineers has been committed to returning value to its shareholders through dividends, which is a positive sign for current and potential investors, particularly those seeking income. However, considering stock price fluctuations and overall market conditions, sustained higher yields also demonstrate financial stability and profitability.

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

The Dividend Growth Rate indicates how much a company's dividend payments have increased over a specific period. A higher growth rate, typically above 5%, is often an indication of good financial health and company profitability, which could make the stock more attractive to investors.

Looking at the data for Siemens Healthineers, the Dividend Per Share Ratios for the years provided show significant variability, with 0% in most years, but spikes in 2020 and 2022. Specifically, the dividend ratios in percentage terms are: [0, 0, 0, 0, 0, 14.2857, 0, 6.25, 11.7647]. The average ratio over these nine years stands at approximately 3.59%, which is below the 5% target. This inconsistency and the low average ratio signify that Siemens Healthineers has not maintained a robust dividend growth rate exceeding 5% over the last decade. The results suggest that while there have been some years with high dividend payouts, the overall trend falls short of the desired 5% growth rate, indicating inconsistency in dividend payments and possibly reflecting periods of financial instability or strategic reinvestment by the company, which may be worth further investigation depending on investment goals.

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

Average Payout Ratio lower than 65% in the last 20 years examines if a company consistently pays out a sustainable portion of its earnings as dividends. A lower ratio indicates potential for dividend growth and financial stability as resources are retained for growth.

Over the years 2015 to 2023, Siemens Healthineers' payout ratio shows an increasing trend from 0% before 2019 to fluctuating values peaking at 70.47% in 2023. The calculation of an average payout ratio to 29.97% (below the 65% benchmark) indicates a generally conservative approach towards dividends, suggesting financial prudence and potential for dividend sustainability and growth. This trend can be seen as positive overall, though the spike in 2023 should be watched as it may indicate changing company conditions or a deliberate shift in payout policy.

Dividends Well Covered by Earnings?

Dividends need to be well covered by earnings to ensure that the company can sustain its dividend payout without compromising its financial health. This ratio signifies the portion of earnings distributed as dividends and is pivotal for assessing dividend stability.

From 2015 to 2017, Siemens Healthineers did not pay any dividends, which can often be attributed to reinvesting earnings back into the business, especially in growth phases. Starting in 2018, the company initiated dividend payments with a Dividend Per Share (DPS) of 0.7. The Dividend Coverage Ratio, calculated as DPS divided by EPS, hovered around 45-57% from 2018 to 2021, indicating that a substantial portion of earnings were retained for reinvestment after paying dividends. This trend shifted slightly in 2023, as the coverage ratio increased to approximately 70.47%, driven by a higher DPS of 0.95 against a lower EPS of 1.348. While a consistent dividend payout is appealing to investors, the upward trend in the coverage ratio warrants attention as higher payout ratios may suggest less earnings being reinvested into the firm. Therefore, while the dividends have been well covered by the earnings historically, the recent trend highlights a need for cautious observation to ensure sustained financial health.

Dividends Well Covered by Cash Flow?

This criterion examines the sustainability of a company's dividend payments. By analyzing the proportion of free cash flow used to cover dividend payouts, we can assess whether a company generates enough cash flow to sustainably finance its dividend policy without compromising other financial needs.

The dividend coverage ratio for Siemens Healthineers (SHL.DE) fluctuates significantly over the analyzed period, from as low as ~9.58% in 2015 to as high as ~83.22% in 2023. In general, a lower percentage indicates that the company retains more free cash flow after paying dividends, which is favorable for financial stability and future growth investments. However, periods where the coverage ratio spikes (e.g., ~67.34% in 2019 or ~83.22% in 2023) suggest that a higher proportion of free cash flow is required to maintain dividend payouts. This could be a sign of stress if these higher percentages persist, making it challenging for the company to allocate funds efficiently. In summary, although the recent trend shows improvement with better coverage, consistently maintaining dividends well-covered by cash flow is critical for Siemens Healthineers (SHL.DE) to assure investors of the dividends' sustainability.

Stable Dividends Since the Company Began Paying Dividends?

The stability of dividends over a long period, typically 20 years, indicates the company's consistent financial performance and resilience during economic downturns. This makes the stock more reliable for income seekers.

Siemens Healthineers (SHL.DE) has shown a relatively stable dividend per share since 2019. The dividends rose from €0.7 per share in 2019 to €0.95 per share in 2023. However, the data reveals that Siemens Healthineers did experience a drop of more than 20% over the past 20 years, specifically before 2019 when the dividends were zero. Since the analysis includes years before 2015, the significant drop meeting the criterion occurred before Siemens Healthineers started paying dividends in 2019. Hence, while the trend since they started paying dividends post-2019 has been good and offers increasing returns to investors, the lack of dividends before 2019 does not meet the desired 20-year stability criterion.

Dividends Paid for Over 25 Years?

Siemens Healthineers (SHL.DE) has distributed dividends consistently over a period of 25 years. Evaluating this criterion helps assess the company's stability and ability to return value to shareholders over a long duration.

Siemens Healthineers has only paid dividends since 2019, which amounts to less than five years of dividend payments. This trend is not in alignment with the criterion that necessitates over 25 years of dividends. However, the quality aligns with the company's relatively recent transition into a publicly traded entity following its spin-off from Siemens AG. The increasing dividend per share (from 0.7 to 0.95 EUR) indicates a positive trajectory in terms of shareholder returns, albeit its brief history. Investors may consider this growth promising but should be aware of the limited long-term dividend history.

Reliable Stock Repurchases Over the Past 20 Years?

Share repurchases refer to a company buying back its own shares from the marketplace, which reduces the number of outstanding shares. It indicates a company’s confidence in its own financial health and its desire to return value to shareholders. Consistent repurchases can be a sign of earnings stability and management's commitment to shareholder returns.

Over the last 20 years, the number of shares for Siemens Healthineers has been relatively stable with just three reliable repurchase years in 2018, 2019, and 2023. The shares outstanding were 1,000,000,000 in 2015 and saw minor fluctuations, ending up at 1,119,472,000 in 2023. The notable increase in shares especially around 2020-2022 with peaks of 1,109,690,000 suggests that while there was some degree of repurchasing, the overall number of shares actually increased over the examined period. This implies that the company did not consistently focus on reducing the share count, reflecting that stock repurchasing wasn’t a primary strategy for returning value to shareholders. With an average repurchase value of 1.4695, it’s clear that major repurchasing activities were minimal. Therefore, the trend is not particularly strong or reliable when considering long-term repurchases as a tool for shareholder value extraction.