Last update on 2024-06-27

Thyssenkrupp (TKA.DE) - Dividend Analysis (Final Score: 4/8)

In-depth dividend analysis of Thyssenkrupp (TKA.DE) using an 8-criteria system. Learn how it scores on key dividend metrics.

Short Analysis - Dividend Score: 4

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

Thyssenkrupp (TKA.DE) was evaluated based on 8 criteria to understand its dividend policy's performance and stability. While it has a dividend yield of 2.3772%, higher than the industry's 1.62%, the historical inconsistency with zero payouts in several years suggests sustainability issues. Its dividend growth rate in the past 20 years stands at 2.7%, below the benchmark of 5%. The company maintains an average payout ratio of 62.16%, under the healthy threshold of 65%, yet experiences fluctuation, showing periods of financial stress. Dividend coverage from earnings shows inconsistency, with several years of negative ratios. The coverage from free cash flow is unreliable, highlighting financial volatility. Over 20 years, the company failed the stability test with dividends dropping more than 20% in some years and had multiple years of no dividends. Thyssenkrupp hasn't paid dividends consistently for 25 years, and its stock repurchases have been irregular.

Insights for Value Investors Seeking Stable Income

Considering Thyssenkrupp's inconsistent dividend payouts and financial volatility, it might not be the best option for income-focused investors looking for stability. The fluctuation in dividend yield and coverage ratios indicate a high-risk profile. However, if you are a long-term investor who can tolerate significant volatility and seek potential future recovery, you might want to look deeper into Thyssenkrupp's overall business performance. For those prioritizing steady and reliable dividend income, there may 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?

Assessing dividend yield is crucial for income-focused investors as it indicates how much a company returns to shareholders in the form of dividends relative to its share price. A higher yield can be attractive if it is sustainable.

Thyssenkrupp's current dividend yield of 2.3772% stands notably higher than the industry average of 1.62%. Historically, Thyssenkrupp has exhibited considerable volatility in its dividend yields: peaking at around 9.8485% in 2009 and dropping to 0% during several periods (2013-2016, 2020-2022). Evaluating this in the context of the industry, which has been more stable, we see that Thyssenkrupp’s yield has most of the time been higher than the industry average. While the recent increase to 2.3772% is positive for income-seeking investors, the inconsistency in historical payouts (with sporadic zero payouts) indicates potential sustainability issues. The impact of fluctuating market conditions and the company’s performance on its set dividend policies should be understood.

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

The Dividend Growth Rate Criterion analyses the annual increase in dividends paid by a company to its shareholders, aiming to compare it to a standard growth rate benchmark.

The Dividend Ratio values for Thyssenkrupp (TKA.DE) over the last 20 years are highly volatile, with several years reflecting negative or zero dividends. There were significant reductions in the dividend ratio, particularly in 2009, 2013, 2020, and multiple years with zero dividends since 2014, indicating a lack of consistent dividend payments. Positive spikes in dividend ratios, such as in 2010 or 2016, do not compensate for the negative and zero ratios. The average Dividend Growth Rate comes out to 2.7%, which is notably below the 5% benchmark. Hence, considering the erratic pattern and overall average, this trend cannot be deemed good for the criterion at hand.

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

The payout ratio is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage.

The average payout ratio for Thyssenkrupp over the last 20 years is 62.16%, which is below the 65% threshold. This suggests that Thyssenkrupp has maintained a relatively conservative approach in distributing dividends, retaining a significant portion of its earnings to reinvest in the business or improve its financial stability. The fluctuation, especially the extreme spikes and negative values, are notable and indicate periods of financial stress or losses. Overall, a payout ratio below 65% is generally a favorable indicator for sustainability of dividends.

Dividends Well Covered by Earnings?

Dividend coverage is a crucial metric that determines whether a company's earnings are sufficient to cover its dividend payouts.

Analyzing the historical data for Thyssenkrupp (TKA.DE), it is evident that dividend coverage over the years has been inconsistent. For instance, the coverage ratio was healthy at 0.59 in 2003, and even improved to around 0.27 by 2008. However, in some years like 2009 and 2011, dividends were not covered as the coverage ratio was negative (-0.64 and -0.12, respectively) due to negative earnings per share (EPS). Furthermore, several consecutive years, from 2012 to 2015, had 0 coverage because no dividends were paid. Recent years show a problematic trend with negative ratios once again and minimal payouts, indicating fragile financial health and limited capacity to sustain dividend payments. Thus, Thyssenkrupp's dividend coverage has been quite poor, particularly during periods of negative EPS, reflecting a high-risk profile for consistent dividend income.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow assesses a company's ability to pay its dividends out of its free cash flow, a critical metric for dividend sustainability. If the cash flows sufficiently cover the dividend payments, it indicates strong financial health and the ability to support ongoing or potentially increasing dividends.

Analyzing Thyssenkrupp's free cash flow from 2003 to 2023 reveals a mixed picture of financial stability and volatility. In several years—such as 2007, 2008, 2009, and particularly post-2016—the free cash flow was negative, indicating that the company did not generate enough cash to cover its expenses, including dividends. For instance, years like 2009, 2010, and 2011 had negative coverage ratios of -1.926, -0.054, and -0.063 respectively. This trend worsened drastically in 2020, when free cash flow plummeted to -€5.51 billion and no dividends were paid out, reflecting a strained financial condition. On the brighter side, there were intermittent years of positive cash flow that comfortably covered dividends, like 2003 and even 2015, with coverage ratios of 0.277 and 2.818 respectively. More recently, in 2023, although the coverage ratio stood at a modest 0.303, it indicates a slight recovery. The historical volatility in cash flow highlights the challenges Thyssenkrupp faces in consistently funding dividends, making it critical for investors to consider these fluctuations when evaluating the stock's dividend reliability.

Stable Dividends Since the Company Began Paying Dividends?

Stable 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.

Over the past 20 years, Thyssenkrupp's (TKA.DE) dividend payments have exhibited significant fluctuations, failing to adhere to the stability criterion. For instance, the dividend per share dropped drastically from €2.6 in 2008 to €0.3 in 2009, marking a decrease of more than 20%. Additionally, there were consecutive years (2012-2014, 2018-2022) where no dividends were issued. Such inconsistency in dividend payments is unfavorable for income-seeking investors who prioritize reliable and steady returns. Therefore, given the volatility and several instances of reduced or suspended dividends, Thyssenkrupp fails to meet the criterion of stable dividends over the past 20 years.

Dividends Paid for Over 25 Years?

Explanation on whether the company has paid dividends consistently for at least 25 years and why it's important.

The data provided showcases the dividends-per-share that Thyssenkrupp has paid from 1999 to 2023. The trend demonstrates several gaps where the company did not pay any dividends, most notably from 1999 to 2001, 2014 to 2015, and 2020 to 2022. Consistency in paying dividends for over 25 years reflects the company's commitment to returning value to shareholders and its robust financial health over a long period. Thyssenkrupp has not been able to maintain this consistency. The interruption spans multiple periods and indicates potential financial challenges or strategic shifts within the company. Hence, the dividend distribution trend for the past 25 years indicates inconsistency, which can be viewed negatively for long-term income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Examine if Thyssenkrupp repurchased stock reliably; it signifies strong financial health and commitment to reward shareholders.

Analyzing the share count for Thyssenkrupp (TKA.DE) over the past 20 years, we see that the number of shares has decreased in certain years, specifically 2004, 2006, 2008, and 2009. However, the reduction in the number of shares was neither consistent nor significant over the long term. Furthermore, the average share repurchase rate of 1.0939 suggests minimal repurchasing activity overall. Such a pattern indicates that Thyssenkrupp has not prioritized stock buybacks as a regular financial strategy. This may be viewed unfavorably by investors looking for regular returns through stock repurchasing programs.