Last update on 2024-06-27

Trustmark (TRMK) - Dividend Analysis (Final Score: 6/8)

In-depth analysis of Trustmark (TRMK) dividend performance using an 8-criteria scoring system, showing stability and sustainability for long-term investors.

Short Analysis - Dividend Score: 6

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

Trustmark (TRMK) was evaluated using an 8-criteria dividend scoring system and scored 6/8. TRMK shows a dividend yield significantly higher than the industry average, which can be good for income investors but might indicate risk if unsustainable. The average annual growth rate of dividends over 20 years falls short of 5%, showing inconsistency. The payout ratio averages around a stable 49.54%, below the critical 65% threshold, suggesting overall sustainability. While the dividend coverage by earnings indicates a declining trend in recent years, dividends are not always well-covered by cash flow, although there are years of good coverage. The company has paid stable dividends for over 25 years but had a significant drop in 2013. TRMK has consistently repurchased shares in recent years, signaling potential financial health and strategic capital return to shareholders.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Trustmark (TRMK) appears to be a stable dividend-paying stock with some caveats. The high dividend yield and consistent payouts over the past 25 years are promising for long-term investors seeking regular income. However, the inconsistent growth rate and periods where cash flow coverage falters suggest income investors should monitor this stock closely. Given its overall performance, it may be a worthwhile consideration for dividend investors but warrants careful attention to ensure dividends remain sustainable.

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 annual dividend income an investor can expect per dollar invested in a stock.

Trustmark (TRMK) has a current dividend yield of 3.2999%, which is significantly higher than the industry average of 2.76%. Historically, Trustmark's dividend yield has often exceeded the industry average over the last two decades. For instance, during the financial crisis in 2008, TRMK's yield spiked to 4.2612% while the industry average was 4.48%. More recently, despite fluctuations, TRMK’s yield has remained above the industry trend, showing a consistent ability to pay dividends above industry benchmarks. This above-average yield can be seen as a favorable indicator for income-focused investors, suggesting a robust dividend policy and strong cash flows. However, such a high yield should also warrant caution; it may indicate lower stock prices or increased risk. Evaluating the sustainability of these dividends is crucial since high yields can sometimes spell trouble if not supported by a company's earnings and prospects.

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

Explanation of how to determine if the Dividend Growth Rate is higher than 5% in the last 20 years and why it is important for the analysis.

The Dividend Per Share (DPS) ratio over the past 20 years shows a fluctuating distribution. Positive growth rates were registered early in the period (2003-2004) with 11.38% and 12.40% respectively. However, significant declines occurred in subsequent years particularly during 2005-2007 where it plummeted to as low as 3.37% in 2008 before flatlining at 0% between 2009-2011. A significant spike in 2013 at 25% was observed followed by a sharp decline to -20% in 2014 and remained at 0% subsequently. The long-term average growth rate of 2.24% considerably falls short of the 5% threshold, indicating an overall negative trend in terms of dividend growth for shareholders. The negative growth observed may be alarming, as it suggests instability and inconsistency in returns for shareholders.

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

The average payout ratio represents the portion of earnings a company distributes to its shareholders as dividends. It is crucial to assess whether it's sustainable. A ratio under 65% typically suggests the company retains adequate earnings for growth, debt repayment, and other needs.

Trustmark (TRMK) displays an average payout ratio of approximately 49.54% over the past 20 years. This value comfortably sits below the critical threshold of 65%. Let's dissect these numbers to understand their collective narrative better. The range for the payout ratios spans from a low of 33.94% in 2023 to a high of 78.38% in 2021. Although there's a noteworthy spike in 2021, exceeding the desired 65%, the overall average ratio remains well within safe limits. This implies that the abnormally high payout ratio in 2021 is likely an anomaly and not indicative of a broader trend. The yearly ratios predominantly fluctuate between 34.25% to around 59.13%, showcasing consistent restraint in maintaining most of the earnings to fuel growth, market expansions, and cushion against economic downturns. Given these figures, it's evident that TRMK holds a commendable balance between rewarding shareholders and preserving capital for future endeavors. Hence, the trend is overwhelmingly positive and supportive of long-term dividend sustainability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

The ratios of dividends per share covered by earnings per share for Trustmark (TRMK) over the years show a trend where the coverage dipped below 50% and spiked drastically only once. The recommended threshold for healthy coverage is typically around 2-3 times, equating to a ratio of 50% or less, implying earnings should ideally be at least twice the dividends. Over the 20-year period provided, the coverage dipped to as low as 34% in 2023, suggesting dividends could potentially be at risk. Although the trend indicates periods of higher coverage, the overall declining ratios in recent years compared to the early 2000's point towards a red flag. It's crucial for investors to take note as this implies the firm's lower ability to sustain its dividend payouts solely from its earnings, particularly during financial downturns. An inconsistent earnings coverage for dividends can indicate potential future challenges for dividend reliability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow specifies that a company's free cash flow should sufficiently cover the dividend payments. It shows the reliability of dividends, as free cash flow accounts for all of the oncoming expenses.

The ratio of free cash flow to dividend payouts for Trustmark (TRMK) fluctuates significantly over the years, suggesting inconsistencies. The ratios range from a low of 0.18 in 2021 to a high of 1.70 in 2020. Generally, a ratio above 1 indicates that dividends are well covered, while figures below 1 signal potential issues. Many years, including 2007, 2012, 2019, 2021, and 2022, show that dividends weren't adequately covered. Inconsistent coverage may raise red flags about dividend sustainability, but periods like 2020 indicate good coverage.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years demonstrate a company's reliable profitability and commitment to returning value to shareholders.

According to the data, Trustmark (TRMK) has maintained a steady dividend per share over the past 20 years, with amounts ranging between $0.685 and $1.15. The only notable drop was in 2013 when the dividend decreased from $1.15 to $0.92, a reduction of more than 20%. This indicates a potential instability in dividend payouts during that year. While Trustmark has largely maintained stable dividend payments, this distinct reduction in 2013 might raise some concerns for income-seeking investors who prioritize consistency.

Dividends Paid for Over 25 Years?

Criterion 6: Dividends Paid for Over 25 Years?

Trustmark (TRMK) has consistently paid dividends each year for the past 25 years. The dividend per share has shown growth from $0.3515 in 1998 to a peak of $1.15 in 2013, and has since stabilized to $0.92 each year from 2014 to 2023. This consistent payout history signals strong financial health and a commitment to returning value to shareholders, a trend that can be considered very favorable for long-term investors.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluate Number of Shares Repurchased Over the Past 20 Years

The company has had periods of share buybacks in various years including 2004, 2005, 2008, and consistently from 2018 to 2023. The average repurchase rate over the past two decades stands at approximately 0.1893. This indicates intermittent buybacks, not demonstrating strong consistency until the last five years. This trend suggests a strategic, albeit non-continuous, approach to share repurchases with recent aggressive buybacks potentially hinting at strong profit performance or excess cash reserves that the company is opting to return to shareholders.