Last update on 2024-06-27

Tapestry (TPR) - Dividend Analysis (Final Score: 6/8)

Discover Tapestry's (TPR) dividend stability, growth, and sustainability through an 8-criteria scoring system, rating TPR 6/8 in dividend performance.

Short Analysis - Dividend Score: 6

We're running Tapestry (TPR) 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?

Dividend yield indicates the percentage of a company's share price that it pays out in dividends each year.

Tapestry's current dividend yield of 3.5316% exceeds the industry average of 2.5%. Over the past 20 years, it's notable that Tapestry initiated dividend payments only in 2009, and its yield has varied significantly. Peaks like the one in 2015 (5.1619%) suggest periods of elevated payout, but drops, such as in 2020 (1.0875%), hint at potential economic challenges. Most recently, the consistent yield above industry average is positive, attracting income-focused investors and signaling solid profitability. Overall, this trend shows Tapestry's strong commitment to returning value to shareholders.

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

Dividend Growth Rate is an essential metric evaluated to understand how a company's dividend payments to shareholders have improved over time. Consistent dividend growth can signal financial health and robust future potential.

Based on the data provided, Tapestry (TPR) has had highly fluctuating dividend growth rates over the last 20 years. Although some years saw substantial increases, like 2010 and 2022, others experienced notable declines, such as 2015 and 2020. The average Dividend Ratio over this period is 17.268%, suggesting an overall positive trend. However, the mixed-performance years may raise concerns about the stability and sustainability of dividend growth. Despite the year-on-year inconsistencies, the average growth being significantly higher than 5% indicates a generally good trend.

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

The average payout ratio indicates the proportion of earnings a company distributes to its shareholders as dividends. A payout ratio lower than 65% is important as it signifies a sustainable dividend policy.

Tapestry's average payout ratio over the last 20 years is 31.92%, well below the 65% threshold. This is a very positive indicator, suggesting a conservative approach towards dividend payouts, ensuring that the company retains a significant portion of its earnings for reinvestment or other purposes. However, there are notable spikes, such as 116.38% in 2015 and 81.99% in 2016, which may signal exceptional circumstances or extraordinary payouts. Nonetheless, the overall trend indicates a sensible and sustainable dividend policy.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings. This criterion examines whether a company's earnings are sufficient to cover the dividends paid to shareholders. A ratio of sufficient earnings per share (EPS) relative to dividends per share (DPS) indicates a healthy dividend policy and financial stability.

Analyzing Tapestry (TPR), we see the following trends in EPS and DPS over the years. The EPS values have generally exhibited an upward trend until COVID-19 impacted the 2020 result, dragging it to negative territory. Starting from 2021, EPS rebounded to $3.0018 and continued its upward trajectory to $3.9594 in 2023. Comparing this to DPS, dividends commenced in 2009 and peaked at $1.314 per share in 2013. The dividend per share significantly dropped during the pandemic (2020), manifesting prudent fiscal management. The dividend coverage ratio (DPS covered by EPS) ranges from minimal values, reaching untenable levels during the pandemic at -0.144, but corrected to 0.328 by 2023. The trends indicate improved coverage post-2020, highlighting stronger financial health."

Dividends Well Covered by Cash Flow?

To ensure the sustainability of dividends, it is crucial to analyze how well they are covered by the company’s free cash flow. This metric indicates whether the company generates enough cash to pay dividends without compromising its operations or growth.

Tapestry's free cash flow (FCF) and dividend payout amounts from 2003 to 2023 show considerable variability. Before 2010, the company did not pay dividends.However, since 2010, the trend of dividends as a percentage of free cash flow provides a crucial insight into dividend sustainability. In early years (2010-2013), the dividend payout ratio compared to FCF (ranging from ~10% to ~29%) was low and sustainable. However, in 2014 and 2016, the coverage ratio surpassed 1, indicating the dividends were not well-covered by cash flow and were potentially unsustainable (2014 at ~49% and 2016 at ~188%). More recently, despite intermittent high ratios, the trend improved with more reasonable coverage rates, such as ~23% in 2021 to ~35% in 2022. This critical insight shows a tendency towards improving coverage, suggesting that the company's recent dividends are more sustainable. With the dividend dipped in 2020 (due to a low FCF of $201 million owing to the pandemic disruption), the higher 2021 FCF ($1.2 billion) significantly recovering dividend coverage. Overall, the recent trend of Tapestry’s dividends covered by cash flow appears competent and sustainable, aligning favorably with investor interests, which is a positive indicator for potential and current stakeholders.

Stable Dividends Since the Company Began Paying Dividends?

When analyzing dividend stability, investors are looking for signs that a company can consistently return value through dividends. A stable or growing dividend payout suggests financial health and management's confidence in the company's future earnings. A drop of over 20% can be alarming, as it may indicate underlying issues.

Over the past 20 years, Tapestry (TPR) began its dividend payouts in 2009. Since then, it has maintained a relatively stable dividend per share, despite a substantial drop in 2020, aligning with the broader economic impacts of the COVID-19 pandemic. The dividend declined from $1.352 to $0.338, which is over a 20% drop, but the recovery to $1.3 in 2022 and further stability into 2023 reflect a resilient rebound. This trend indicates a generally stable dividend policy with an understandable hiccup during an unprecedented global event. For income-seeking investors, this would be seen as a positive trend overall, reinforcing confidence with the recent recovery.

Dividends Paid for Over 25 Years?

This criterion assesses whether Tapestry has a reliable history of returning capital to shareholders via dividends for over 25 years. It indicates long-term financial health and commitment to shareholders.

Tapestry (TPR) has not consistently paid dividends for over 25 years. According to the data, the company started paying dividends in 2010. This gives them roughly 13 years of dividend history, falling short of the 25-year benchmark. While Tapestry has shown a steady increase in dividend payments since 2010, it is crucial to note the inconsistency in 2020, where the dividend per share dropped significantly from $1.352 in the prior years to $0.338 before recovering again to $1.1 in 2021 and $1.3 in 2022 and 2023. This inconsistency in 2020 might be attributable to the economic impact of the COVID-19 pandemic. Overall, while Tapestry has demonstrated a growing commitment to returning value to its shareholders over the last 13 years, it does not meet the 25-year requirement for a reliable dividend history. Investing in companies with a shorter dividend history can be seen as riskier because it might indicate vulnerability to economic downturns or changes in corporate policy over the long term.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over an extended period, such as 20 years, indicate a company's commitment to returning value to shareholders by reducing the number of outstanding shares. This practice can also enhance earnings per share.

Over the past 20 years, Tapestry (TPR) has demonstrated a consistent trend in stock repurchases. The number of shares has decreased from roughly 371.7 million in 2003 to about 236.4 million in 2023. Notable years of buyback activities include 2006 through 2015, and from 2020 onward. This trend indicates that Tapestry has a strong focus on returning capital to shareholders. The average repurchase rate of -2.173% supports this finding, as it shows a steady reduction year over year. These consistent buyback activities positively affect shareholders by potentially increasing the value of their shares and demonstrating prudent capital management.