Last update on 2024-06-27

SLB (SLB) - Dividend Analysis (Final Score: 5/8)

Analyze the stability and performance of SLB's dividends using an 8-criteria scoring system, resulting in a final score of 5/8 for its dividend reliability.

Short Analysis - Dividend Score: 5

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

SLB (SLB) has an overall dividend score of 5 based on an 8-criteria system. 1. **Dividend Yield:** SLB's current yield (1.9216%) is below the industry average of 2.78%, despite higher yields in some past years. 2. **Dividend Growth Rate:** Although there are years with notable increases, the dividend growth rate has been inconsistent and volatile. 3. **Payout Ratio:** The average payout ratio of 19.40% is below the 65% threshold, but there are periods with extreme high and negative values. 4. **Dividends Covered by Earnings:** The coverage has been inconsistent, with many years showing weak earnings coverage, especially between 2015 to 2020. 5. **Dividends Covered by Cash Flow:** Varied levels of cash flow coverage indicate periods where dividend payouts may not have been sustainable. 6. **Stable Dividends:** SLB has maintained dividend stability without drops exceeding 20%, showing robust management. 7. **Dividends Paid Over 25 Years:** Consistent payments for over 25 years highlight the company's resilience and commitment. 8. **Reliable Stock Repurchases:** SLB has a history of strategically planned stock repurchases, indicating sound financial health.

Insights for Value Investors Seeking Stable Income

SLB shows mixed results in its dividend analysis. While it has a strong history of paying consistent dividends for over 25 years and maintains a low payout ratio, its recent dividend yield is lower than the industry average, and it has shown instability in growth and coverage by earnings and cash flow. This suggests caution for potential investors. It might be worth investigating further if you prefer stable dividends and a long dividend history, but you should stay cautious of its recent performance and volatility.

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 an important metric as it shows how much a company pays out in dividends each year relative to its stock price.

Analyzing SLB's (SLB) dividend yield over the last 20 years, we notice fluctuations with significant highs in 2018 (5.5432%) and 2019 (4.9751%). In 2023, the yield stands at 1.9216%, which is below the current industry average of 2.78%. This indicates that despite a history of attractive yields, SLB's recent dividend yield is less competitive. Moreover, the stock price trajectory reveals volatility, particularly in 2008 and the 2018-2020 period, which influences yield calculations. Although yields like 2018's are promising, the current lower yield highlights potential issues in maintaining high dividend payouts or stock price increments.

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

Assessing the Dividend Growth Rate requires analyzing whether dividends have grown consistently at a rate higher than 5% over the last 20 years.

The Dividend Ratio numbers for SLB over the past 20 years tell a complex story. There have been years with substantial increases in dividend payouts, such as 2005 (11.7021%), 2006 (19.0476%), and multiple instances afterward. However, negative figures like -8.9455% in 2013 and -42.8571% in 2021 indicate that SLB has cut dividends in several periods. Despite occasional spikes, the presence of negative growth rates and the dramatic fluctuations show that SLB’s dividend growth has been unstable. With an average Dividend Ratio of 8.911%, it may seem that the overall growth rate is favorable. However, considering the erratic pattern and multiple negative years, it is challenging to assert a stable growth rate above 5% for this entire period. Hence, while the average might look good, the trend is volatile, making this criterion only partially satisfactory.

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

The Average Payout Ratio is crucial in determining financial stability and sustainability of dividend payouts. A ratio consistently below 65% indicates that a company can comfortably cover its dividends without sacrificing essential investments.

The average payout ratio for SLB over the past 20 years is approximately 19.40%. As this number is well below the 65% threshold, it indicates a positive trend, showing that SLB has generally been able to cover its dividend obligations comfortably. However, it's important to highlight some extreme values within the dataset, such as a very high ratio of 115.16% in 2003, and negative values in some years (e.g., -160.8752 in 2016, and -27.3258 in 2019). These negative values suggest that there were instances where the company paid dividends even while incurring losses. Despite these anomalies, the overall average indicates robust financial health concerning dividend payments.

Dividends Well Covered by Earnings?

Dividends well covered by earnings imply that a company generates enough profit to distribute dividends without jeopardizing financial stability.

Analyzing the Dividend Coverage Ratio from 2003 to 2023, SLB's dividends were not always well-covered by earnings. The coverage ratio varied significantly with years such as 2004 (0.38) and 2005 (0.23) showing weak earnings coverage. The situation particularly deteriorated during 2015 to 2020, with especially severe moments in 2016 (-1.61) and 2017 (-1.84), where SLB's earnings were negative, thereby signalling distress in dividend coverage. Conversely, positive coverage estimates, such as in 2022 (0.27) and 2023 (0.34), indicate some recent improvements. However, consistent under 1 coverage ratio indicates ongoing strain and the need for better earnings to ensure sustainable dividend payments. Overall, this trend is concerning as frequent subpar coverage may imply risk to future dividend stability.

Dividends Well Covered by Cash Flow?

Explain the criterion for SLB (SLB) and why it is important to consider

Dividends well covered by cash flow implies that a company's dividend payments are sustainable and not over-stretching the company's financial capacity. Analyzing how the free cash flow compares to the dividend payout amount is crucial in assessing this aspect. For SLB, its cash flow coverage ratio over the past '01-03 years fluctuates significantly, suggesting variant levels of coverage and highlighting some periods where the dividend payout may not have been sustainable from its operating cash flow.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate the company's capability to generate consistent profits and return value to shareholders, which is crucial for income-seeking investors. A sudden drop by more than 20% may signal potential financial problems or a shift in the company's strategy.

Over the past 20 years, SLB's dividends per share did not experience a drop exceeding 20% in any single year. For instance, while there were reductions in dividends, such as from $2.5 in 2015 to $2 in 2016 (a 20% reduction), the drop never exceeded the critical 20% mark. This indicates that SLB has maintained a relatively stable dividend policy, which is a positive sign for income-seeking investors. The consistent ability to return cash to shareholders suggests robust financial health and prudent management strategies. This stability adds significant appeal to SLB as a reliable dividend-paying stock for investors seeking steady income.

Dividends Paid for Over 25 Years?

Consistency in paying dividends for over 25 years shows a company's stable financial health and commitment to returning value to shareholders.

SLB has consistently paid dividends for the last 25 years. Starting with $0.376 per share in 1998, the dividend grew substantially to $1 per share in 2023, despite some fluctuations due to market conditions. For instance, notable increases were observed in 2007, where dividends per share rose to $0.7, and in 2014 to $1.6 per share. Although dividends declined during challenging economic periods, such as in 2019-2020, the company maintained payments demonstrating resilience. This trend indicates solid financial positioning but shows some vulnerability to global market and sectoral changes. Nonetheless, such consistency over 25 years is a positive sign.

Reliable Stock Repurchases Over the Past 20 Years?

Criterion: Reliable stock repurchases over the past 20 years, evaluated through stock repurchase activity. This helps investors understand how consistently the company returns excess cash to shareholders, indicating financial health and shareholder value commitment.

Analyzing the number of shares for SLB, it's evident that reliable stock repurchases occurred in years 2007, 2008, 2009, 2012, 2013, 2014, 2015, and 2019. Earlier in the timeline, from 2003 through 2007, there was an overall increasing trend in the number of shares. However, starting 2008, SLB made significant repurchases visible in the years mentioned, influencing the average repurchased value of 1.0137. This trend indicates SLB's sporadic yet strategically planned approach towards repurchases, likely aimed at optimizing shareholder returns during financially beneficial periods. This pattern shows good financial health and an intelligent approach to capital management.