Last update on 2024-06-27

Stellantis (STLA) - Dividend Analysis (Final Score: 4/8)

Stellantis (STLA) Dividend Analysis using an 8-criteria scoring system, earning a final score of 4 out of 8 for performance and stability.

Short Analysis - Dividend Score: 4

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

The dividend analysis evaluates Stellantis (STLA) using 8 criteria to assess its dividend policy. The results reveal several key points: 1. **Dividend Yield**: Stellantis has a high dividend yield of 6.9912%, well above the industry's average. However, this yield has been very volatile, indicating potential financial instability. 2. **Dividend Growth Rate**: The average annual growth rate is 4.53%, below the desired 5% threshold, and has shown significant inconsistencies over the years. 3. **Payout Ratio**: The payout ratio is very low at 9.84%, suggesting dividends are well-covered, but there have been years where the ratio slightly exceeded sustainable levels. 4. **Dividend Coverage by Cash Flow**: In recent years, free cash flow has impressively covered dividends, improving from negative coverage in early 2000s. 5. **Dividend Stability**: Stellantis lacks stable dividend payouts over the past 20 years, with many fluctuations and recent payments only beginning in 2017. 6. **Long-term Dividend Payments**: Stellantis doesn't meet the criterion of paying dividends for over 25 years. 7. **Reliable Stock Repurchases**: Though some buybacks occurred, they are inconsistent and erratic. Overall, these findings point to some strengths but also significant weaknesses in Stellantis' dividend policy.

Insights for Value Investors Seeking Stable Income

Considering the analysis, Stellantis (STLA) may attract certain investors looking for high yields and short-term gains. However, the volatility in dividends, inconsistent payout history, and unreliable stock buybacks are red flags for long-term income-focused investors. The company's policy shows areas of financial prudence tempered by cycles of instability and fluctuation. Long-term investors might find it better to explore more stable alternatives, though short-term investors could see some benefits from the high dividend yield.

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. This metric is a crucial indicator for income-focused investors as it helps them gauge the return on investment solely from dividends. A higher dividend yield can signal a lucrative investment, but it might also indicate underlying issues with the company's stock price or financial stability.

Stellantis (STLA) boasts a compelling dividend yield of 6.9912%, which significantly outpaces the industry average of 2.91%. Examining historical data, Stellantis' dividend yield has radically fluctuated. For instance, in 2019, the yield soared to an astronomical 16.6471%, and although it receded in subsequent years, it still floated above the industry's average. This exceptional yield in 2019 and 2021 (16.5167%) likely reflects abnormally high dividend payouts or temporarily depressed stock prices. The notable yield advantages over time have been maintained even as the company's stock price depict undulating trends, closing at $23.32 in 2023. However, these highs present an intriguing paradox. Primarily, dividend-focused investors might revel in the yield benefits, but the volatility signals possible financial instability or cyclical business performance, presenting the trend as both favorable yet cautionary for long-term investors.

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

Considering the Dividend Growth Rate criterion requires assessing whether the rate exceeds 5% over the last 20 years. This metric is critical as it reflects the company's ability to increase its returns to shareholders consistently, indicating financial health and growth.

Based on the data provided, STLA had dividends as follows: 0 for many years, -100 in 2017, -67.934 in 2020, 290.8571 in 2021, -58.9912 in 2022, and 31.2834 in 2023. The sharply fluctuating dividend per share indicates inconsistencies. The average dividend ratio calculated over this period stands at 4.53%. Such an average, being slightly below the 5% threshold, coupled with the significant negative swings, suggests instability in dividend policies, which is concerning and indicates that the dividend growth rate is not sustainably above 5%.

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

The payout ratio is the proportion of earnings a company pays to its shareholders in the form of dividends. It is important as it indicates the sustainability of dividend payments. A ratio lower than 65% generally suggests that the company retains enough of its earnings for growth and other needs, thus ensuring long-term stability.

Stellantis (STLA) has maintained an average payout ratio of approximately 9.84% over the past 20 years, which is significantly lower than the 65% threshold. This is a very positive indicator as it shows the company's dividends are well-covered by its earnings, allowing for reinvestment into the business. Moreover, the payout ratio has only exceeded 65% in one year (2016 with a payout ratio of 93.13%). In recent years, the payout ratio has been well within a sustainable range, peaking at 58.95% in 2021 and further dropping to around 25% in 2022 and 2023. This trend exemplifies fiscal prudence, suggesting a balanced approach to rewarding shareholders while retaining capital for future growth.

Dividends Well Covered by Earnings?

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

Dividends are well covered by the earnings.

Dividends Well Covered by Cash Flow?

This criterion assesses whether a company generates enough free cash flow (FCF) to comfortably cover its dividend payouts. It's important because a company with well-covered dividends is typically in a stronger financial position and less likely to cut its dividend in the future.

Examining Stellantis' free cash flow (FCF) and dividend payout from 2003 to 2023, we can detect several fluctuations. For instance, in 2003 and 2004, the FCF was negative, and the dividend coverage ratios were negative as well (-0.0033 and -0.0070). This trend indicates a bad period where dividends were not covered by cash flow, meaning the company either paid out dividends from reserves or borrowed funds. As of recent years, the cash flow situation has greatly improved, with FCFs of around $12.2 billion in 2023 and dividend coverage ratios above 0.3. In financial terms, FCF comfortably covering dividends (with ratios above 1) reflects a healthy trend, such as seen in 2019 with a ratio of 1.47. The dramatic improvement in FCF and coverage ratios in the last decade notably signals a positive shift towards better financial health and stability. Therefore, the trend from poor dividend coverage to significantly better coverage is excellent and reflects positively on the company’s current financial position.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over an extended period demonstrate the company's reliability in rewarding shareholders, crucial for those seeking consistent income streams.

Analyzing Stellantis' (STLA) dividend per share over the past 20 years reveals a pattern of inconsistencies, primarily driven by zero payouts for the majority of this period. Except for the years 2017 and beyond where dividend payments began, several fluctuations are observed. Starting with 0.011 in 2017 and sporadic payments afterward ranging from 2.183 in 2019 down to 0.7 in 2020, and a high of 2.736 in 2021, it is clear there is a lack of stable dividend payments. This inconsistency and significant variability, including dramatic reductions and increases, indicate a rather unstable dividend history. For income-seeking investors, this trend would be concerning as it doesn’t meet the criterion of steadiness needed for reliable income.

Dividends Paid for Over 25 Years?

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

Stellantis has not paid consistent dividends for over 25 years, with large gaps observed and recent activity starting only in 2017, highlighting an inconsistent dividend history.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases refer to a company's consistent and strategic buybacks of its own shares over a period, which usually indicate confidence in its own value and a strong balance sheet.

Over the past 20 years, Stellantis (STLA) has demonstrated intermittent stock buybacks in the years 2007, 2008, 2009, 2012, 2019, 2020, and 2023. While an average of approximately 8.98 million shares repurchased per year indicates some level of buyback activity, the inconsistency can be observed in the gaps during certain years. For example, from 2012 to 2019 there appears to be a notable absence of share repurchases, only to resume more robustly in later years. This sporadic pattern may suggest a less reliable or opportunistic approach to stock repurchases rather than a planned and deliberate long-term strategy. This trend is less favorable as it lacks the consistent returning of value to shareholders through regular buybacks, which might be expected for a more stable and confident company. Instead, the data indicates variability that could reflect changes in cash flow, market conditions, or strategic priorities. Such an approach demands careful scrutiny by investors to understand the underlying motivations and future projections for similar buybacks.