Last update on 2024-06-27

Seagate Technology Holdings (STX) - Dividend Analysis (Final Score: 4/8)

Detailed analysis of Seagate Technology Holdings (STX) dividend performance. Final score: 4/8 based on an 8-criteria scoring system.

Short Analysis - Dividend Score: 4

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

Seagate Technology Holdings scored a 4 out of 8 in the 8-criteria system used to assess the performance and stability of its dividend policy. Here's a brief look at each criterion and how Seagate fared: 1. **Dividend Yield Higher than Industry Average?** - Not specified but important to consider alongside other factors. 2. **Average Annual Growth Rate higher than 5% in the Last 20 Years?** - This criterion measures the company's capability to consistently grow its dividend payouts. Seagate has shown both excellent growth years and significant declines during economic downturns, displaying volatility. 3. **Average Annual Payout Ratio lower than 65% in the Last 20 Years?** - Seagate's average payout ratio is appropriately low at 13.87%, indicating room for growth and conservative financial management, though some fluctuations warrant attention. 4. **Dividends Well Covered by Earnings?** - The dividend coverage ratio varied significantly, suggesting inconsistency in ensuring dividends are reliably covered by earnings, raising sustainability concerns. 5. **Dividends Well Covered by Cash Flow?** - While there are positive signs of dividends being covered by free cash flows in recent years (0.93 in 2023), the past fluctuations suggest cautious optimism. 6. **Stable Dividends Since the Company Began Paying Dividends?** - Seagate has not consistently paid stable dividends since 2003, indicating unreliability for income-seeking investors. 7. **Dividends Paid for Over 25 Years?** - Seagate has not consistently paid dividends for over 25 years, which poses challenges for those seeking long-term consistent income. 8. **Reliable Stock Repurchases Over the Last 20 Years?** - Seagate more or less maintained reliable stock repurchases, supporting stock price and providing value to shareholders at intervals.

Insights for Value Investors Seeking Stable Income

Based on Seagate Technology Holdings' mixed performance across these dividend criteria, it may be worth considering for investment if you value periods of strong dividend performance with some volatility. However, if seeking long-term, stable dividends without inconsistencies, you might want to proceed with caution or explore more stable alternatives. Ensure to monitor financial health, market conditions, and cash flow stability for future evaluations.

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?

Stock Price Close is the market price of the stock at the end of the trading day.

The trend of Seagate's stock prices over the past two decades shows significant volatility, including steep declines during economic downturns like 2008. For instance, in 2008 the stock price closed at a low of $4.43. The most recent data shows a recovery and stabilization around $85.37 in 2023 which shows a good recovery.

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

Explain the criterion for Seagate Technology Holdings (STX) and why it is important to consider

This criterion measures the company's ability to consistently increase its dividend payouts over a long period. A sustained high growth rate in dividends often signals strong financial health and profitability.

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

The average payout ratio, calculated as the dividend paid out to shareholders relative to the net income of the company, is used to evaluate whether a company is distributing a sustainable portion of its earnings as dividends. A ratio less than 65% is generally considered favorable, as it indicates that the company is conserving enough earnings for growth, debt repayment, or other critical expenses.

Seagate Technology Holdings (STX) has an average payout ratio of 13.87% over the past 20 years. This low payout ratio suggests a conservative approach towards dividend distribution, ensuring ample retained earnings for growth and other financial obligations. While fluctuations and higher values in recent years are observed, the overall average remains well below the 65% threshold, positioning Seagate favorably for dividend sustainability. Notably, instances of negative payout ratios or exceedingly high values in some years (e.g., 2020) warrant attention as they indicate years of poor profitability or high dividend payments relative to earnings.

Dividends Well Covered by Earnings?

When analyzing dividends, it is crucial to ensure that they are well covered by the earnings per share (EPS). This indicates that the company generates sufficient profit to pay out its dividends, reflecting financially sound management.

The range of dividend per share covered by earnings per share for Seagate Technology Holdings (STX) from 2012 to 2023 fluctuates between -1.0956 to 1.3674. Particularly, in 2019, a coverage ratio of 1.3674 indicates a strong ability to cover dividends from earnings, which is favorable. Conversely, negative ratios (such as -1.0956 in 2023) suggest the dividends were not covered by earnings, which raises red flags about the sustainability. The inconsistency over the years shows instability in ensuring dividends are reliably covered by earnings, provoking concerns for potential investors regarding dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends being well covered by cash flow is essential to ascertain the sustainability of a company’s dividend payments. If free cash flow sufficiently exceeds the dividend payouts, it indicates a lower likelihood of the company needing to cut dividends, borrow money, or issue new shares to meet its obligations.

The Free Cash Flow (FCF) data for Seagate Technology Holdings (STX) has varied significantly over the years, with values ranging from nearly zero to over $2.6 billion. Although this variability demonstrates the company's ability to generate substantial cash flow in certain years, the consistency and reliability of these cash flows are in question. When comparing FCF to dividend payout amounts, a crucial trend emerges: the ratio of dividends covered by FCF varies widely, from as low as 0 (years with zero cash flow or zero dividend payments) to 5.73 (in 2007). Recent years show some stability, with ratios around or slightly above 0.5 in 2020, 2021, and fluctuating in 2022 and 2023. A ratio higher than 1 indicates strong coverage, while a ratio below 1 suggests dividends are not well covered by FCF. In the most recent fiscal year, 2023, Seagate had a FCF of $626 million against a dividend payout of $582 million, achieving a coverage ratio of 0.93. This is a positive sign, but given the historical fluctuations, potential investors should remain cautious. The dividend coverage ratio implies that while dividends were reasonably covered in 2023, the trend in cash flow and payout inconsistency needs monitoring for long-term sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Seagate Technology Holdings (STX) and why it is important to consider

Stable dividends over the past 20 years indicate a company's consistent earnings and reliable business model, which is essential for income-seeking investors. These investors rely on a steady stream of income, and a drop in dividends can significantly affect their returns and overall confidence in the company.

Dividends Paid for Over 25 Years?

This criterion examines whether Seagate Technology Holdings has paid dividends consistently for over 25 years.

Upon analyzing the dividend data for Seagate Technology Holdings from 2000 to 2023, it is evident that the company has not consistently paid dividends for over 25 years. The dividend payments began around 2003 with an initial minimal payout of $0.14 per share. There were interruptions, such as in 2009 and sporadic adjustments in subsequent years. For instance, the dividends spiked drastically in specific years (e.g., 2014 at $4.2 per share) but then fell again in the following years. The consistency required for over 25 years of dividend payments is lacking in this data, which indicates a less stable and predictable approach toward dividend distribution. Consequently, this trend can be seen as unfavorable for those investors who prioritize long-term consistency in dividend payments.

Reliable Stock Repurchases Over the Past 20 Years?

reliable stock repurchases

Based on the data, Seagate Technology Holdings demonstrated reliable stock repurchases in several key years over the last 20 years. These years include 2012, 2012, 2013, 2015, 2016, 2016, 2017, 2019, 2020, 2021, 2021, 2022, and 2023. The overall trend suggests that there were periods of significant stock repurchasing, particularly noticeable in 2016, 2020, and 2021, where the number of repurchased shares was notable.