Last update on 2024-06-28

Tessco Technologies (TESS) - Dividend Analysis (Final Score: 5/8)

Explore the dividend analysis of Tessco Technologies (TESS), scoring 5/8 on performance and stability using an 8-criteria system.

Short Analysis - Dividend Score: 5

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

The dividend analysis for Tessco Technologies (TESS) using an 8-criteria system shows mixed results. Despite having some impressive moments in the past, such as high dividend yields in 2012 and 2017, TESS has shown inconsistent dividend payouts, with zero dividends from 2019-2022. Although the average payout ratio over 20 years is good (58.63%), the dividends have not been well covered by earnings recently and the average annual growth rate, while technically over 5%, shows volatility. The company has also failed to maintain consistent dividends, doesn't have a history of paying dividends for more than 25 years, and has shown fluctuations in stock repurchase trends. Overall, TESS lacks reliability and stability in its dividend policy, which is crucial for income-focused investors.

Insights for Value Investors Seeking Stable Income

Based on the analysis, investing in Tessco Technologies (TESS) for its dividends may not be advisable for those seeking reliable income. The inconsistency in dividend payouts, recent zero yields, and volatility in dividend growth suggest a lack of stability. While there have been periods of significant payouts, these are not consistent enough to assure long-term investors. Therefore, it might be better to look into other stocks with a more stable and reliable dividend history.

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 crucial as it shows how much a company pays out in dividends relative to its stock price, reflecting its income-generating potential and investor appeal.

Tessco Technologies (TESS) has shown significant variability in its dividend yield over the past 20 years. The company paid dividends intermittently, with peak yields in years like 2012 (6.5041%), 2014 (6.6667%), and 2017 (7.1301%). However, it shows zero dividend yields both in earlier years (2003-2008) and more recent years (2019-2022). This sporadic pattern suggests an inconsistent income stream for dividend-focused investors, contrasting sharply with the industry average which remains more stable. The most recent trend showing 0% is unfavorable compared to the current industry average of 1.29%. What stands out is that TESS initially had promising periods that, if not maintained, can disappoint long-term income investors.

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

This involves measuring the annual increase in dividends paid to shareholders over 20 years and whether it exceeds 5%.

Analyzing Tessco Technologies' (TESS) dividend growth over the past 20 years reveals a non-linear and inconsistent pattern. The dividend per share ratios fluctuate drastically, ranging from spikes (188 in 2012) to negative values and even zero in some years. The average dividend ratio stands at 8.39658%. However, the erratic dividend history, with numerous years of no dividends or negative dividends, suggests a highly volatile approach to shareholder returns. While technically the average is greater than 5%, the inconsistency raises concerns about TESS's ability to provide stable and predictable dividend growth. This volatility is generally seen as a negative trend for potential investors seeking reliable income from dividends.

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

The average payout ratio measures the percentage of earnings a company pays to its shareholders in the form of dividends. A lower payout ratio generally indicates a more sustainable dividend policy.

For Tessco Technologies (TESS), the average payout ratio over the last 20 years is 58.63%. This is below the threshold of 65%, indicating a moderately good trend in terms of dividend sustainability. Although some years (e.g., 2015, 2016, 2017, and 2018) saw extremely high payout ratios, these outliers didn't push the average above the critical 65% mark. Furthermore, recent years show either low or non-existent payout ratios, which may suggest cautiousness in maintaining dividend levels. Therefore, while the trend shows sustainability, those high-ratio years should be closely monitored in future analyses.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This criterion assesses whether a company's earnings are sufficient to cover dividend payments. A well-covered dividend ensures sustainability and reduces the likelihood of dividend cuts during earnings volatility.

Analyzing Tessco Technologies' EPS and DPS from 2003 to 2022 reveals critical insights. With EPS fluctuating but showing significant downturns in recent years (negative values in 2019, 2020, and 2021), the company faced challenges. The EPS to DPS ratio dipped below 1 from 2003 to 2009, indicating that dividends were not covered by earnings. Although there were better years (2011 and 2012 with coverage ratios above 0.7), the overall trend spotlighted growing instability. The last few years evidenced unsustainable dividends, culminating in halting dividends in recent years due to insufficient EPS. Currently, with negative EPS in 2019, 2020, and 2021, the efficiency and sustainability of Tessco Technologies' dividends remain highly questionable. This trend is unfavorable as it reflects financial instability and challenges in maintaining consistent returns to shareholders.

Dividends Well Covered by Cash Flow?

Explain the criterion for Tessco Technologies (TESS) and why it is important to consider

Dividends being well covered by cash flow means that a company generates sufficient cash to cover its dividend payments. This is crucial as it indicates financial health and sustainability of dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over 20 years, without drops exceeding 20%, are vital for income-oriented investors, reflecting financial health.

While Tessco Technologies (TESS) initiated dividend payments in 2009 with a notable progression peaking in 2012 at $1.44, the trajectory then showcased inconsistencies. From 2013, dividends decreased to $0.72, fluctuated but declined again significantly in 2020 to $0.02, ceasing altogether by 2021. The considerable drops, especially post-2019, indicate unstable dividends. Therefore, over two decades, Tessco hasn't maintained the stable, reliable dividend payout that income-seeking investors typically prefer, reflecting broader financial or strategic challenges within the company.

Dividends Paid for Over 25 Years?

Whether a company has paid dividends for over 25 years can be a sign of financial stability and a commitment to returning value to shareholders. It indicates a longstanding and potentially reliable income stream for investors.

Tessco Technologies has not consistently paid dividends over a 25-year period. The data indicates that from 1998 to 2009, no dividends were paid. Dividends began in 2010 but were discontinued again in 2020 and 2021. The highest dividend per share was issued in 2012 at $1.44, but this was followed by a significant decline, and some years saw no dividend payouts at all. This erratic payment history can be seen as a negative trend since consistency in dividend payments is often indicative of a company's stable financial health and commitment to its shareholders. Thus, Tessco does not fulfill this criterion, which might be concerning for income-focused investors seeking reliable dividends.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases highlight a company's confidence in its own financial health and future prospects. It can signal to investors that the company's management believes its stock is undervalued or that it has excess cash that can be returned to shareholders.

The number of shares for Tessco Technologies (TESS) has mostly decreased from 2003 to 2022. Particularly during the years 2004 through 2009, and intermittently in 2015, 2016, 2018, and 2020, the company repurchased shares, reducing their number year over year. Despite a fluctuating trend in some years (such as some increases in shares outstanding in 2011 to 2013 and again in 2017 to 2022), the average repurchase rate over the past 20 years stands at -2.2686%. On the surface, this downward trend in shares indicates that Tessco Technologies has been consistently buying back shares, a stable positive trend that signifies a measure of confidence in its valuation. However, occasional increases suggest the trend isn’t perfectly steady, highlighting potential need-based issuance or other variations in finance strategy. Therefore, the repurchase trend is relatively good but has had deviations.