Last update on 2024-06-27

State Street Corporation (STT) - Dividend Analysis (Final Score: 6/8)

State Street Corporation (STT) dividend analysis with a score of 6/8 evaluates the performance and stability of their dividend policy using an 8-criteria scoring system.

Short Analysis - Dividend Score: 6

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

State Street Corporation (STT) was evaluated using an 8-criteria system to determine the performance and stability of its dividend policy. The overall score it received was 6 out of 8. Here's a detailed breakdown: **Dividend Yield:** Currently at 3.4082%, which is lower than the industry average of 4.33%. While the yield has improved over 20 years, it remains below average, suggesting room for improvement. **Dividend Growth Rate:** Fluctuations have been observed, with an average increase of only 10% in recent years. The past volatility signals instability, though recent figures are more stable. **Payout Ratio:** STT has consistently maintained a payout ratio below 65%, averaging 24.72%. This is favorable, indicating sustainable dividends. **Dividend Coverage by Earnings:** Positive trend, with payouts well within safe thresholds. However, 2009 was a challenging year, though recent coverage is strong. **Dividend Coverage by Cash Flow:** Inconsistencies observed. Although some years show robust coverage, 2023 had a very low ratio, demonstrating volatility and potential reliability issues. **Stability of Dividends:** Mainly stable except for a drastic drop in 2009. Post-2009 recovery is commendable, but risks exist. **Dividends Paid for Over 25 Years:** This criterion wasn't explicitly covered in the request. **Reliable Stock Repurchases:** Mixed results; some years with strong buybacks, but overall showing a slight net issuance of shares. Reliability is seen but may not significantly enhance shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, State Street Corporation (STT) appears to be a moderately stable dividend-paying stock. While it has shown resilience and positive trends in recent years, there are concerns over historical volatility in growth rates and dividend coverage by cash flow. For conservative investors seeking higher, consistent yields, STT might seem less appealing due to its past fluctuations and lower-than-average yield. However, those looking for potential stock price appreciation in addition to dividends might find it interesting. Thus, it could be worth deeper consideration if your investment strategy includes both income and growth components.

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 provides insights into the cash returns that investors receive for each dollar they invest in a company's stock, a crucial metric for income-focused investors.

State Street Corporation (STT) currently has a dividend yield of 3.4082%, which is lower than the industry average of 4.33%. Historically, STT's dividend yield has shown significant fluctuations over the past 20 years, reaching its lowest point at 0.0919% in 2009 and hitting its peak at 3.4082% in 2023. This trend is an indicator that while the yields have improved in recent years, they are still not on par with the industry average. It suggests that STT might have room to improve its dividend payouts to be more competitive within the industry. Coupled with the data that shows STT's stock price and dividends per share have generally increased over time, the lower yield may also imply that the company’s stock price appreciation is outpacing its dividend growth. For conservative investors looking for higher yields, this could be a downside, but for those who are also chasing capital gains, it might still be attractive.

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

The Dividend Growth Rate measures the annualized percentage rate of growth that a company’s dividend undergoes over a period. A growth rate higher than 5% is generally seen as a positive signal of financial health and shareholder value.

The Dividend Growth Rate for State Street Corporation (STT) has a fluctuating trend over the past 20 years. The average dividend ratio stands at 86.49%, which seems questionable with very high and very low spikes. This indicates significant volatility. For instance, in 2009, there was a massive dip to -95.79%, but an impressive surge by 2011 to 1700%. Recently, the rate has steadied around 10%, which is a more stable indicator of present and future performance. Overall, while there are moments of high appreciation, the volatility seen in the last 20 years could be a point of concern for conservative dividend investors. This erratic behavior means precaution should be taken as past performance shows a lack of consistent growth above 5% annually.

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

Criterion 1.2 requires evaluating whether State Street Corporation's average payout ratio has been below 65% for the past 20 years. The payout ratio is important because it indicates how much of the company's earnings are being returned to shareholders in the form of dividends.

The historical payout ratio data for State Street Corporation (STT) shows that the company has consistently maintained a payout ratio well below the 65% threshold over the past 20 years. With the average payout ratio at approximately 24.72%, this trend is quite favorable for investors. A lower payout ratio generally suggests that the company retains a larger portion of its earnings for reinvestment, which can lead to growth in the long-term. Moreover, during this period, the stability in the payout ratio even through financial crises (especially noticeable in 2008 when the ratio dropped dramatically to -1.008 due to financial turmoil) indicates a solid dividend management strategy. Overall, this trend is positive as it suggests that the dividends paid out by the company are sustainable.

Dividends Well Covered by Earnings?

Dividends being well-covered by earnings is crucial as it indicates the company can afford to pay its dividends without harming its financial stability. The payout ratio helps investors gauge how sustainable the dividend payments are.

An analysis of State Street Corporation (STT) over the past two decades reveals a generally positive coverage of dividends by earnings, with the payout ratio consistently below 0.44. This indicates that STT has restrained its dividend payments within a safe threshold, thereby bolstering investor confidence. In 2009, coverage was negative due to earnings per share turning negative, signaling a challenging period, possibly the financial crisis aftermath. In recent years, the coverage has improved, peaking at 0.4377 in 2023, suggesting strong earnings support. This general trend bodes well for the sustainability and potential growth of STT's dividends, a positive sign for long-term investors.

Dividends Well Covered by Cash Flow?

This criterion evaluates how well dividends paid to shareholders are covered by the company's free cash flow. It is important because free cash flow represents the actual cash that a company can use for discretionary purposes, including dividend payments. A high coverage ratio indicates that the company generates enough cash flow to sustain its dividend payments comfortably, reducing the likelihood of future dividend cuts.

Over the span from 2003 to 2023, State Street Corporation displays a fluctuating trend in its dividend coverage by cash flow. For instance, in years like 2004 and 2012, the coverage ratios were high at 2.61 and 0.31, respectively, indicating the company's robust capability to cover dividend payouts. Conversely, years like 2008 and 2009 had negative ratios of -0.15 and -0.04, showcasing financial duress. More recently in 2023, the ratio stands abysmally low at -7.7, an alarming sign. This inconsistency portrays volatility and uncertainty in State Street's ability to cover dividends reliably, which is a negative trend from an investor's perspective.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Upon examining State Street Corporation's dividend per share data over the last 20 years, we can see that the dividend payments were largely stable except for a significant cut in 2009. Dividends dropped from $0.95 per share in 2008 to $0.04 per share in 2009, representing a drastic reduction of over 95%. However, the dividends quickly rebounded in subsequent years, reaching $2.64 per share by 2023. The ability to recover and grow dividends post-2009 is commendable, and it indicates a positive resilience. Despite this recovery, income-seeking investors should carefully consider the potential risks, highlighted by the 2009 drop.

Dividends Paid for Over 25 Years?

Explain the criterion for State Street Corporation (STT) and why it is important to consider

Dividends Paid for Over 25 Years?

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years are important as they typically indicate a company's commitment to returning value to shareholders. They also suggest efficient capital allocation and can be a sign of strong financial health.

Looking at the data, State Street Corporation (STT) has shown a pattern of stock repurchases over the past 20 years, with 12 years out of 21 demonstrating this activity. Notable repurchase years include 2005, 2011-2019, 2020, 2021, and 2023. However, the overall average repurchased share count over 20 years is -0.0065, indicating a slight net issuance of shares rather than a repurchase. This trend can be considered mixed; although multiple years show consistent repurchases, the average dilution (∆0.65%) suggests that the buybacks have not predominantly outweighed new issuances. Hence, the stock repurchase reliability is somewhat robust, but the overall impact on shareholders may not be significantly value-enhancing.