Last update on 2024-06-28

Varta (VAR1.DE) - Dividend Analysis (Final Score: 4/8)

Analyze Varta (VAR1.DE) dividend performance with an 8-criteria scoring system. Final score 4/8 indicating mixed stability and attractiveness.

Short Analysis - Dividend Score: 4

We're running Varta (VAR1.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The analysis of Varta's (VAR1.DE) dividend policy reveals both positive and negative aspects. While the company boasts an attractive high dividend yield (11.0027% in 2022), its dividend payments have been highly inconsistent and volatile over time. Varta has faced years with zero dividends and some anomalies with extreme yields (e.g., 2008's 184.8%). The average annual growth rate of dividends is negative, indicating no substantial positive growth over the years. Additionally, Varta's average payout ratio is concerning, with significant fluctuations and a negative average. The dividends are often not well-covered by earnings or cash flow, indicating potential sustainability issues. The company has not paid dividends consistently for over 25 years and shows an unstable trend in dividend history.

Insights for Value Investors Seeking Stable Income

Given Varta's inconsistent history of dividend payments, high payout volatility, and negative growth rate, it may not be a reliable choice for investors seeking stable and consistent dividend income. Investors should be cautious and thoroughly investigate Varta’s financial health and future prospects before considering it as a dividend stock. The attractive yield should not overshadow the underlying issues of volatility and sustainability. Therefore, it might be wise to look for more stable and reliable dividend-paying companies.

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 financial ratio that shows how much a company pays out in dividends each year relative to its stock price. A higher dividend yield indicates a higher return to investors in the form of dividends, relative to the equity price. This metric is important for investors seeking income through dividends.

Varta's dividend yield in 2022 stands at an impressive 11.0027%, significantly exceeding the industry average of 0.99%. Looking at Varta's historical data, the company has shown erratic dividend yields with anomalies, notably in 2008 (184.8%), which suggests potential one-off events or irregular payouts. However, the recent yields becoming substantial only from 2021 onwards (2.1834%) reveal a trend towards higher yields. While a higher yield is generally positive for income-focused investors, the underlying volatile patterns, exemplified by no dividends in many years and a spike only recently, could be a red flag pointing towards sustainability issues. Furthermore, the substantial decline in stock price from 121.4 in 2019 to 22.54 in 2022 indicates potential distress. Hence, while the high dividend yield in 2022 is attractive, the overall trend raises concerns about the reliability and stability of these payouts.

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

Dividend Growth Rate is the annualized percentage rate of growth that a particular stock's dividend undergoes over a period.

Varta's dividend per share has shown values indicating negative numbers in some years. Specifically, since 2009, the company's dividends have mostly been zero, with the notable exception of -89.1775 in 2009 and -100 in 2010, followed by years of zero dividends, and then another negative value of -0.8 in 2022. Given this erratic and largely negative trend, we see no substantial positive growth rate here. The average dividend ratio is -9.498875000000002, indicating a poor performance in dividend growth. This suggests that the firm's dividend policy may not be favorable for investors seeking consistent or growing dividends. This trend is bad for the criterion as it shows inconsistency and negative growth in dividends over the last 20 years.

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

Average Payout Ratio lower than 65% in the last 20 years and why it is important to consider.

The payout ratio for Varta (VAR1.DE) over the past 20 years has a significant fluctuation. From the data provided, starting from 2003 to 2022, there are some remarkable aberrations including -154.5834 in 2009 and 80.2311 in 2021. However, the average payout ratio amounts to -6.218525. Generally, a payout ratio lower than 65% is deemed healthy as it indicates that the company is capable of retaining sufficient earnings for growth, investments, or cushioning against future losses. Varta's negative average payout rate implies that many years, there were losses or high instances of dividends compared to net income. This trend could be discerned as unstable and unfavourable, especially with such significant negative outliers. This potentially raises a red flag concerning the company's consistency in dividend distribution. So, the general outlook here indicates a problematic trend in terms of dividend payments sustainability.

Dividends Well Covered by Earnings?

Explain the criterion for Varta (VAR1.DE) and why it is important to consider

Dividends are considered well covered by the earnings when the Earnings Per Share (EPS) exceeds the Dividend Per Share (DPS). This coverage is crucial because it ensures the company generates enough profit to sustain its dividend payouts. For Varta, the trend from 2003 to 2022 should be examined to see if the EPS consistently covers or exceeds the DPS.

Dividends Well Covered by Cash Flow?

What does 'Dividends Well Covered by Cash Flow' mean, and why is it important?

The metric 'Dividends Well Covered by Cash Flow' looks at whether a company's dividend payouts can be sustained from its free cash flow. This is pivotal as it indicates the financial health and sustainability of dividend payments to shareholders. If a company's dividends are not well-covered by its cash flow, it might suggest financial strain or the possibility of reduced dividends in the future, which would be a red flag for investors.

Stable Dividends Since the Company Began Paying Dividends?

The criterion of stable dividends over the past 20 years is essential for assessing the reliability and consistency of a company's dividend payments. Investors, particularly those seeking a steady income, view stable dividends as a sign of financial health and predictability. The definition of stable here means that the dividend per share should not have dropped by more than 20% at any point over the 20-year period.

Analyzing the provided data for Varta (VAR1.DE), the company has not maintained a consistent dividend payment history over the past 20 years. In particular, dividends were not paid at all for most years from 2003 to 2020, with an exception in 2008 when a significant outlier of 9.24 was issued, followed by a 1 dividend in 2009. Then, in 2021 and 2022, a dividend of 2.5 and 2.48 respectively was issued. This lack of consistent dividend payments and the volatility in the amounts in years when dividends were paid suggest an unstable dividend policy. Furthermore, there were no instances of a dividend decreasing by more than 20% year over year primarily because dividends were generally not issued. For income-seeking investors, Varta's dividend history would be seen as unreliable and inconsistent, indicating a bad trend for this criterion.

Dividends Paid for Over 25 Years?

Longevity is a critical factor in assessing the reliability and stability of a company's dividend policy. Consistent dividend payments over a span of at least 25 years suggest that the company has a strong, sustainable business model and is less likely to face financial instability that might necessitate suspending or reducing dividends.

Varta (VAR1.DE) does not meet the criterion of having paid dividends for over 25 years. According to the provided data, Varta has only intermittently paid dividends starting from 2008, with notable gaps in several years until 2021. This lack of consistent dividend payments indicates potential volatility in its business operations or financial health. It is important for investors seeking stable and reliable dividend income to consider these interruptions before investing in Varta.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Varta (VAR1.DE) and why it is important to consider

Stock repurchases, also known as share buybacks, occur when a company buys back its own shares from the marketplace. The primary reason companies undertake stock repurchases is to reduce the number of outstanding shares, which can increase the ownership percentage of each remaining share. This can be a sign of management's confidence in the company's future prospects. Evaluating the consistency and reliability of stock repurchases over the past 20 years helps to understand the company's capital allocation strategy and potentially augments shareholder value.