Last update on 2024-06-27

Stryker (SYK) - Dividend Analysis (Final Score: 7/8)

Stryker (SYK) scored 7/8 in the dividend analysis, showcasing a robust and stable dividend policy exceeding industry averages.

Short Analysis - Dividend Score: 7

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

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?

The dividend yield is an essential measure showing how much a company pays out in dividends relative to its stock price. It reflects return on investment.

Stryker's (SYK) dividend yield of 1.0185% is notably higher than the industry average of 0.29%, indicating strong shareholder returns. Over the past 20 years, the company's dividend yield has generally been higher than the industry average, sometimes several times higher. The lowest yield Stryker ever had was 0.1647% in 2003, while the industry average that year was 0.11%. At its peak in 2011, Stryker's yield reached 1.5148%, compared to the industry average of 0.46%. This higher yield, consistently above industry norms, suggests a robust and attractive dividend policy. Stryker's strong cash flow and profitability have allowed it to sustain this trend, making it a solid choice for income-focused investors. Stryker's dividend yield historically has shown not only resilience but also upward momentum, signifying financial health and a commitment to returning value to shareholders. Given this trajectory and the higher yield compared to industry peers, the trend is favorable for the dividend yield criterion.

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

Dividend Growth Rate is a key measure for evaluating the potential long-term value of an income-generating investment. A growth rate above 5% suggests a strong ability to increase dividend payments, indicating robust financial health.

Looking into the Dividend Ratios from 2003 to 2023, Stryker (SYK) shows a mixture of ups and downs. Particularly striking are the years 2006 (100%) and 2010 (152%), which suggest strong periodic growth spurts. On average, the dividend growth rate stands at approximately 24.85%, far exceeding the 5% benchmark. This trend is evidently positive, suggesting that Stryker has not only a stable but rapidly growing dividend payout, enhancing the appeal to long-term investors.

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

The payout ratio is a critical metric in assessing a company's dividend sustainability and financial health.

Stryker (SYK) has maintained an average payout ratio of 31.28% over the past 20 years, which is well below the threshold of 65%. This indicates a prudent and sustainable dividend policy, ensuring that the company retains enough earnings for reinvestment and growth while steadily rewarding its shareholders. It's noteworthy that the payout ratio spiked to 93.65% in 2014, potentially due to a significant non-recurring expense or a temporary drop in earnings, but normalized thereafter. Overall, the trend of maintaining a lower payout ratio is positive for Stryker's long-term financial stability and its ability to sustain and grow its dividend payouts.

Dividends Well Covered by Earnings?

Dividends being well-covered by earnings essentially means that a company generates enough earnings to pay the dividends it declares. The metric is vital as it indicates financial stability and sustainability of dividend payments.

Over the years, Stryker's Earnings Per Share (EPS) data alongside their Dividend Per Share (DPS) has shown variability in how well dividends are covered by earnings. For instance, in 2010 the coverage ratio was around 19.76%, suggesting that earnings were sufficient to cover the dividends. However, certain years like 2013 showed a significant dip to around 41.78%, indicating potential strain. Despite fluctuations, the overall trend remains relatively solid but could improve for greater financial prudence. Consistency and a higher ratio typically offer more confidence to investors about dividend sustainability—it’s advisable for Stryker to aim for a dependable surplus in earnings over dividends for assured investor confidence.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow analyses how comfortably a company's generated cash flow can cover its dividend payouts. This metric is crucial as it informs investors about potential future dividend sustainability.

Stryker's (SYK) free cash flow has seen significant growth from $504 million in 2003 to $3.136 billion in 2023. However, its dividend payout amount has also increased from $23.7 million in 2003 to $1.139 billion in 2023. The key ratio of dividend coverage by cash flow illustrates fluctuating trends. For example, in earlier years (2003: 4.7%, 2004: 6.9%), the coverage was quite strained, reflecting lower cash flow buffer. Post-2010, the coverage consistently improved, hitting a peak of 82.8% in 2015—indicating a more robust safety net between cash flow and dividend payouts. Notably, in recent years, while the ratio dipped in 2021 to 34.6%, it rebounded to more favorable levels in 2022 (51.6%) and settled at 36.3% in 2023. Despite some fluctuation, the general upward trend and relatively healthy ratios suggest that SYK largely maintains a good balance between its free cash flow and dividend obligations. However, investor vigilance is recommended, especially if downward trends persist.

Stable Dividends Since the Company Began Paying Dividends?

The stability of dividend payments over a couple of decades highlights a company's commitment to returning value to its shareholders, which is especially critical for income-focused investors.

Stryker (SYK) has demonstrated remarkable stability in its dividend payments over the last two decades. Observing the data provided, the company's dividends per share have seen a consistent upward trajectory from $0.07 in 2003 to $3.05 in 2023. Not only has the dividend increased every year, but there were also no instances where the dividend dropped by 20% or more year-over-year. This trend is exceedingly positive as it underscores Stryker's financial health and commitment to returning capital to its shareholders on a continual basis. For an income-seeking investor, this represents a significant assurance of dependable income flows.

Dividends Paid for Over 25 Years?

How long a company has consistently paid dividends is a significant criterion for assessing dividend stability and reliability.

Stryker (SYK) has consistently paid dividends for over 25 years, showing a commitment to returning value to shareholders. From 1998 to 2023, the dividend per share has increased from $0.0075 to $3.05, indicating a strong upward trend. This substantial growth not only reinforces the company's robust financial health but also suggests positive future prospects. Shareholders can view this as a reliable sign of stability, making it an attractive investment. Thus, the trend is very good for ensuring confidence among existing and potential investors.

Reliable Stock Repurchases Over the Past 20 Years?

Criterion for Reliable Stock Repurchases

The analysis of Stryker (SYK) stock repurchase program over the past 20 years reveals certain trends. The company has seen a reduction in the number of shares in specific years (2006, 2008, 2009, 2011, 2012, 2013, 2015, 2016, 2019), indicating deliberate share repurchase actions. Average share repurchase rate of -0.3379 implies a steady reduction of shares over this tenure. Reducing total outstanding shares often enhances Earnings Per Share (EPS), creating value for shareholders. Despite these gains, years without repurchase (2021-2023) suggest varying commitment levels. Overall, given that major reductions span critical market events (e.g., 2008 Crisis) shows prudence in repurchase strategies, reinforcing shareholder value creation while ensuring capital flexibility.