Last update on 2024-06-27

Salzgitter (SZG.DE) - Dividend Analysis (Final Score: 6/8)

Salzgitter (SZG.DE) - Thorough dividend analysis evaluating stability, performance, yield, growth, coverage, and history using an 8-criteria scoring system.

Short Analysis - Dividend Score: 6

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

In a recent analysis, Salzgitter (SZG.DE) scored 6 out of 8 on a dividend performance and stability evaluation. The company's strong points include a dividend yield of 3.5714%, higher than the industry average, and an average payout ratio of 4.20%, which is well below the 65% threshold. However, the dividend growth rate, dividend coverage by earnings and free cash flow, as well as the overall stability, show significant fluctuations over the years. There are examples of high yields and growth, but also years with no dividends or negative values. This inconsistency poses concerns about the dependability of Salzgitter’s dividend policy. Despite paying dividends for most of the past 25 years, sporadic gaps in payments and unstable payout ratios signal potential risks for investors seeking reliable returns.

Insights for Value Investors Seeking Stable Income

Given the inconsistent track record of dividend payments and coverage, it is recommended to approach Salzgitter (SZG.DE) with caution if considering it for its dividend performance. While the current dividend yield is attractive, historical volatility in payouts and insufficient earnings coverage in some years could be red flags for long-term dividend investors. It would be prudent to look deeper into the company's overall financial health and consider the potential for future stability before making an investment decision. If you prioritize consistent and reliable dividend income, there might be better alternatives in the market.

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?

A higher dividend yield generally indicates that an investor receives a larger return on their investment in terms of dividends relative to the stock price. It is important to consider this in comparison to industry averages to determine if the company is performing well in terms of returns to shareholders.

Salzgitter's current dividend yield of 3.5714% is substantially higher than the industry average of 2.98%. This shows that the company is offering a superior return to its shareholders compared to other companies in the industry. Over the last 20 years, Salzgitter's dividend yield has fluctuated significantly, with highs such as 3.6405% in 2003 and lows close to 0%, such as in 2006. Notably, there have been years where Salzgitter did not pay any dividends, like in 2021, which affects the consistency of returns. Despite these fluctuations, the current higher yield is a positive indicator, especially when compared to the relatively steadier, but lower, industry figures.

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

The Dividend Growth Rate shows how much the dividend payouts have increased over a specific period. It's important as it signals the company's profitability and its ability to return capital to shareholders.

The dividend ratio data for Salzgitter (SZG.DE) over the last 20 years presents a highly volatile pattern. With an average dividend ratio of approximately 5.63%, this seems to meet the 5% threshold criterion. However, given the high variability, where several years have substantial negative dividends and some years even have no dividend payout, this trend indicates instability. Despite meeting the average growth rate, the fluctuating nature of dividends highlights potential inconsistencies in financial performance or strategic changes in dividend policies. Therefore, while on paper the growth rate looks satisfactory, the underlying instability makes this a concerning trend for long-term dividend investors.

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

The payout ratio is a financial metric showing the proportion of earnings a company pays to its shareholders in dividends. A lower payout ratio is preferable as it suggests a sustainable dividend policy.

Salzgitter's average payout ratio over the last 20 years is 4.20%, which is significantly below the 65% threshold. The consistent low payouts, with some negative values in certain years, could indicate dividend sustainability and prudent earnings retention. However, the negative ratios also suggest instances of negative earnings where dividends were still paid, which merits further investigation.

Dividends Well Covered by Earnings?

Dividends should be adequately covered by earnings per share (EPS) to ensure the company's profitability and long-term sustainability. A well-covered dividend indicates that the company generates enough profit to reward its shareholders without compromising its financial stability.

Salzgitter (SZG.DE) has experienced fluctuating earnings per share over the years, highlighted by highs in 2006 (23.8484) and recent lows in the early 2020s. For example, in 2021, the EPS was substantial at 19.9955, but it seems to hit 0 in 2023 according to the provided numbers. The dividend payout has similarly varied, but its coverage by EPS has been inconsistent. In 2006, dividends were well-covered (23.8484 EPS covering 0.5 dividends), but in years with negative EPS (e.g., 2009, 2012, and 2013), the dividends per share were negative, indicating poor coverage. This trend suggests that while there are periods of high profitability and adequately covered dividends, Salzgitter struggles with sustainability and predictability of dividends due to volatile earnings. Ensuring dividends are consistently covered by EPS is crucial for long-term investor confidence. The data illustrate periods of concern, especially when the coverage ratio dips below 1, which should prompt deeper analysis and potential caution from investors.

Dividends Well Covered by Cash Flow?

This criterion assesses whether a company's dividend payments are covered by its operating activities, specifically by its free cash flow (FCF). It's essential to consider because dividends funded from FCF rather than borrowed funds or equity issuance are more sustainable. A company that consistently generates sufficient FCF to cover its dividends is generally less likely to cut its dividend in the future.

Analyzing the free cash flow and dividend payout amount for Salzgitter from 2003 to 2023 shows a fluctuating trend in its ability to cover dividend payments from free cash flow. Significant observations include years like 2007, where the free cash flow peaked at over €1 billion, but no dividends were paid. Conversely, in years like 2009 and 2010, notable negative FCF values were recorded with no dividend payments, simplifying financial strain. Recent years (2015-2023) exhibit an inconsistency; for instance, 2019-2020 show no dividends despite negative FCF, whereas 2023 shows a significant increase in dividend coverage (38.6%), indicating a positive trend. However, the volatility, like high negative payout ratios (e.g., -234.4% in 2016), necessitates caution. Evaluating this broad timespan helps stakeholders understand Salzgitter's inconsistent but moderately improving capacity to sustain dividends via free cash flow, which is positive but warrants a vigilant outlook due to historical fluctuations.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments implies that a company has been able to maintain consistent distributions to its shareholders. For income-seeking investors, this consistency is valuable as it provides a reliable stream of income and indicates the company's financial health and commitment to returning value to shareholders.

Analyzing the given data of Salzgitter (SZG.DE) over the past 20 years, there have been significant fluctuations in the dividend per share, including substantial reductions. For instance, the dividend dropped from €2 in 2008 to €1.4 in 2009 (a 30% drop), and from €0.55 in 2019 to €0 in 2020. Overall, the company has not maintained stable dividends, with several instances where dividends have either decreased significantly or were completely omitted. This inconsistency implies a level of risk for income-seeking investors relying on dividends as a steady source of income.

Dividends Paid for Over 25 Years?

This criterion assesses whether a company has a long-standing track record of paying dividends over a period of 25 years. Long-term dividend payments are an indicator of financial health and commitment to shareholders.

Salzgitter (SZG.DE) has a mixed track record when it comes to paying dividends over the past 25 years. They have paid dividends for most years; however, there were instances, such as the years 1999, 2000, 2009, and 2021, where no dividend was paid. Despite these gaps, the more recent trend shows a strong commitment to dividend payments, with the last three years (2021-2023) showing a significant rebound in payouts, reaching 1 EUR per share in 2023. Overall, this trend can be seen as positive, albeit with some inconsistency, thus stressing the need for potential investors to scrutinize financial resilience and external economic factors impacting dividend payments.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

Stock repurchases serve as crucial indicators of a company's management confidence in the financial health and future prospects of the business. Share buybacks can be seen as a direct method to return wealth to shareholders by reducing the number of shares outstanding. This often results in supporting or increasing the stock price.