Last update on 2024-06-27

Unum Group (UNM) - Dividend Analysis (Final Score: 8/8)

Analyze Unum Group's (UNM) dividend policy using an 8-criteria system for high yields and stability. Final Dividend Score: 8/8.

Short Analysis - Dividend Score: 8

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

Unum Group (UNM) is assessed using an 8-criteria dividend scoring system. They performed strongly with a score of 8. UNM's dividend yield exceeds the industry average at 3.0739%. While dividend growth rate averaged 5.05% over 20 years, it did show some volatility. The payout ratio over 20 years remains low at 17.91%, indicating sustainable dividends. Dividends are well-covered by both earnings and cash flow. The company has maintained or increased dividends, except once, steadily for over 25 years. UNM also has a history of reliable stock repurchases over the last 20 years, supporting financial health.

Insights for Value Investors Seeking Stable Income

Based on the strong score of 8 and positive indicators regarding Unum Group's dividend stability, it's worth considering UNM for investment, particularly for income-focused investors. Their consistent dividends, low payout ratio, and reliable stock repurchases highlight financial health and potential for stable returns.

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 a critical measure indicating how much a company pays out in dividends each year relative to its stock price.

Unum Group (UNM) has a current dividend yield of 3.0739%, significantly higher than the industry average of 1.73%. Historically, Unum has shown a fluctuating but generally upward trend in its yield, reaching highs of 4.9695% in 2020. This is particularly favorable given it suggests more attractive returns for income-focused investors compared to other industry players. However, such a high yield can sometimes be a sign of potential issues with stock price depreciation. Between 2018 and 2020, despite high yields, the stock price dipped from $54.89 to $22.94, hinting at underlying market concerns. Thus, while the high yield is attractive, investors should also consider potential risks.

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

Dividend Growth Rate refers to the annualized percentage change in the dividends paid by a company over time. It is vital because it indicates the company's commitment to returning value to shareholders and its ability to generate earnings growth.

Based on the provided Dividend Ratio data, Unum Group's average Dividend Growth Rate over the last 20 years is approximately 5.05%. This metric falls slightly above the 5% threshold, which is generally considered a positive indicator. However, the fluctuating nature of the individual yearly ratios—from negative values as low as -36.99% to positive values as high as 18.69%—signifies periods of inconsistency. Furthermore, the average masks significant variability, particularly between 2003 and 2008 when dividends either were negative or zero. Despite recent stabilizations with positive growth, the turbulent history is somewhat concerning and suggests the need for a deeper analysis to explain such volatility.

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

Examining the Average Payout Ratio over an extended period provides insights into a company's profit distribution strategies and dividend sustainability.

Unum Group's (UNM) average payout ratio over the last 20 years is 17.91%, which is significantly below the 65% threshold. This implies that Unum Group retains a substantial portion of its earnings, allowing for reinvestment and financial stability. Furthermore, such a low payout ratio presents the company as potentially having a conservative approach towards shareholder returns, potentially strengthening the firm's long-term financial health. Given the requirement that a lower average payout ratio indicates profitability and growth potential, Unum Group meets and exceeds this criterion, suggesting a positive outlook for dividend sustainability.

Dividends Well Covered by Earnings?

It is important to determine if a company's dividends are well covered by its earnings, as this indicates the sustainability and reliability of dividend payments without compromising financial health.

To analyze Unum Group (UNM), we examine the Earnings per Share (EPS) and the Dividend per Share (DPS) over the provided years. A key metric, the Dividend Payout Ratio (DPR), which is calculated as DPS divided by EPS, reveals the proportion of earnings distributed as dividends. A lower DPR suggests that dividends are better covered by earnings. From the data: - In earlier years like 2003, 2004, UNM showed negative EPS, causing the DPR to also be negative, suggesting unsustainable dividends. - In the further years, the DPR remained between 0.123 and 0.510, signaling responsible dividend payouts. - Specifically, recent years demonstrate a DPR of 0.212 in 2023, indicating robust earnings coverage. The trend shows a generally good indication of dividends being well covered by earnings, particularly in the later years.

Dividends Well Covered by Cash Flow?

Examining whether dividends are well covered by cash flow is crucial because it indicates whether a company has sufficient free cash flow to cover its dividend payments without having to rely on debt or diminishing its operation funds. A higher coverage ratio suggests sustainability, while a lower ratio might signal potential issues in maintaining dividends.

Unum Group's (UNM) Dividend Covered by Cashflow ratio over the years has varied, featuring both favorable and challenging periods. Starting at around 0.073 in 2003, the ratio displayed minor fluctuations with an upward trend until it peaks at 0.662 in 2020. Notably, the ratio enhances significantly after the 2008 financial crisis, surpassing the 0.1 mark consistently post-2009, indicating improved dividend coverage by cash flow. For instance, in 2012, the extraordinary rise to 0.158 reflects robust cash flow generation. The value of 0.662 in 2020 could point towards exceptional conditions likely impacted by external economic factors, reflected by the temporary spike in free cash flow. However, the overall positive trend presents that Unum Group prudently manages its free cash flow to sustain and potentially grow dividend payouts. This rising ratio sheds light on better financial health and efficient cash flow management, consolidating investor confidence in future dividend stability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in 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.

The data provided indicates a steady increase in dividends per share for Unum Group (UNM) over the past 20 years. Starting from $0.373 in 2003, the dividends have grown to $1.39 in 2023. Notably, the company managed to maintain or increase its dividends almost every year, with the exception of a minor dip in 2004, where the dividend decreased from $0.373 to $0.3 per share. Despite this slight reduction, there were no instances where the dividends dropped by more than 20%. The overall trend shows resilience and suggests that Unum Group has a solid commitment to returning value to shareholders. For income-seeking investors, this stability is a positive indicator.

Dividends Paid for Over 25 Years?

Evaluating whether a company has paid dividends consistently over a long period is crucial for assessing its financial stability and commitment to returning value to shareholders. A track record of over 25 years is noteworthy as it highlights the company's resilience and ability to generate consistent profits.

Unum Group has demonstrated an impressive track record of paying dividends consistently since at least 1998, which covers a span of over 25 years. Not only has the company maintained its dividend payouts, but it has also shown positive growth in dividends per share over the years, especially in the recent decade. For instance, the dividends per share increased from $0.586 in 1998 to $1.39 in 2023. This trend is particularly remarkable, considering the global financial crises and other macroeconomic challenges faced over the years. It speaks volumes about Unum Group's strong financial health, stable cash flows, and commitment to returning value to its shareholders. Such a consistent and growing dividend payout can be highly attractive to income-focused investors. Overall, this is a positive indicator for Unum Group's dividend policy, showcasing stability and shareholder value creation.

Reliable Stock Repurchases Over the Past 20 Years?

Describe why reliable stock repurchases over a 20-year period would be an important criterion for analyzing a company's financial health and dividend potential.

Reliable stock repurchases are a strong indicator of financial health. For Unum Group (UNM), there were 15 years within the past 20 years where the number of shares outstanding decreased consistently. There was a notable reduction from 355,654,450 shares in 2007 to 196,659,700 shares in 2023. An average repurchase of -1.5837% per year signifies a steady effort to return value to shareholders, often through the reduction in the number of outstanding shares. This strategy positively affects earnings per share (EPS) and may signal that the company views the stock as undervalued.