Last update on 2024-06-28

Sacyr (VHM.F) - Dividend Analysis (Final Score: 5/8)

Analyze the performance and stability of Sacyr's (VHM.F) dividend policy with an 8-criteria scoring system, final score: 5/8. Dividend analysis for investors.

Short Analysis - Dividend Score: 5

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

The analysis covers the dividend performance of Sacyr (VHM.F) based on an 8-criteria system, resulting in a score of 5. Highlights include: the company's current dividend yield of 4.4013%, nearly double the industry average, and a history of dividend variability with peaks and periods of no dividends. The company has not maintained a consistent Annual Dividend Growth Rate above 5%, nor a stable annual payout ratio, but appears prudent over time with a 9.47% average payout ratio. Challenges include inconsistent dividend coverage by earnings and cash flow, lack of stable dividends since inception, an incomplete 25-year dividend payment history, and unreliable stock repurchasing activity.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Sacyr has shown strong recent dividend yields compared to the industry and demonstrates some prudent payout practices. However, inconsistency in dividend history, unstable cash flow coverage, and a poor stock repurchase record suggest caution. While it has potential in the short term, long-term reliability is uncertain, making it necessary for investors to conduct deeper due diligence. For risk-averse, income-focused investors, this stock may not currently be an optimal choice.

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 can indicate a good return on investment if the company's dividends are sustainable.

Sacyr (VHM.F) has a dividend yield of 4.4013%, which is nearly double the industry average of 2.27%. Over the past 20 years, its dividend yield has shown significant variability, peaking at 9.8847% in 2008 and hitting zero during periods like 2009-2010 and 2012-2014. The company has managed to consistently increase its dividend yield since 2015, with small fluctuations. For instance, its yield has remained above 4.1% from 2019 to 2023. During this period, the stock price fluctuated but generally exhibited a growth trend from €1.62 in 2018 to €3.09 in 2023. This trend in dividend yield indicates strong performance and appeal to dividend-focused investors. However, potential investors should note past inconsistencies which could resurface. Additionally, while the current yield is advantageous compared to peers, due diligence on the company’s ability to sustain such yields long-term is essential.

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

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth of a company's dividend. A consistent DGR above 5% is generally seen as a positive indicator of a company's financial health and its commitment to returning value to shareholders.

The analysis of Sacyr's Dividend Ratio over the last 20 years presents a volatile landscape. The values fluctuate greatly with significant downturns in certain years, specifically 2009, 2012, and 2016, where the dividend per share ratio plummeted to -100%. Positive peaks are observed in 2021 and 2022 with dividends per share ratios of 17.0732 and 19.7917 respectively. However, the company's average dividend ratio stands at -6.382945000000001. This variability and the negative average suggest that Sacyr struggles with maintaining consistent positive growth in dividends, indicating instability. Therefore, it can't be said that Sacyr has maintained a Dividend Growth Rate higher than 5% consistently over the last 20 years, and this trend is generally unfavorable for the criterion of stable dividend growth.

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

Average payout ratio measures the percentage of earnings paid to shareholders in dividends.

Examining Sacyr's (VHM.F) payout ratio over the last 20 years reveals an average of 9.47%, which is dramatically lower than the 65% threshold. This trend is positive as it indicates prudence in earnings distribution, retaining more capital to reinvest in the business. The high payout ratios in 2016 and 2020, both above 100%, were anomalies and should be investigated separately to understand underlying causes.

Dividends Well Covered by Earnings?

Why is the criterion 'Dividends are well covered by the earnings' important to consider for Sacyr (VHM.F)?

The criterion that dividends are well covered by earnings is crucial for investors, as it serves as an indicator of the company's ability to sustain its dividend payouts. If the earnings per share (EPS) are consistently higher than the dividends per share (DPS), it demonstrates that the company is generating sufficient profit to reward its shareholders without compromising its financial stability. On the other hand, if EPS is lower than DPS consistently, it signals that the company might be using its reserves or taking on debt to pay dividends, which is not sustainable in the long run.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow measure the proportion of free cash flow that is used to pay dividends. A high percentage indicates that a company is generating enough cash to cover its dividend payments, which is a positive indicator of financial health.

The analysis of Sacyr's dividends being covered by free cash flow reveals a complex picture. The data shows multiple years where the free cash flow was non-existent up until 2017, creating a severe limitation for the company's ability to cover dividends in those years. From 2023, Sacyr started showing significant positive free cash flow with the highest amount being €427,977,000 in 2021. However, the corresponding dividend cover ratios have fluctuated greatly. The ratio reached its peak at approximately 32.83% in 2017, indicating that in this year only one-third of the generated cash flow was used for dividend payments—a fairly safe margin. But in subsequent years, the ratios dropped precipitously back towards single digits, which could indicate potential difficulties or prudent cash conservation. This inconsistency reveals a problematic sign. Ideally, investors want to see a steady or growing dividend coverage ratio that signifies strong and consistent cash flow generation relative to dividends. Consequently, Sacyr's performance in this regard is fairly inconsistent and requires further stabilization to clearly regard its financial health as robust.

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.

Evaluating Sacyr's dividend per share data points reveals significant fluctuations and instability over the past 20 years. While the data confirms that there wasn't a year when dividends dropped by more than 20%, it is crucial to note that there were several periods where dividends were completely halted (2009, 2010, 2012, 2013, and 2014). Such inconsistency makes Sacyr less reliable for an income-seeking investor. For instance, the dividends were completely suspended for three consecutive years from 2012 to 2014. After resuming, the dividends per share remained relatively low compared to the high dividend years (2005-2008). Additionally, the returns from 2017 onwards have shown marginal growth, but this trend remains unconvincing, especially for investors dependent on dividends as a steady income stream. Therefore, while technically meeting the criterion of not dropping by 20%, Sacyr fails to offer the dividend stability needed over the 20-year timeline.

Dividends Paid for Over 25 Years?

A consistent dividend payment history of over 25 years is a hallmark of financial stability and shareholder friendliness.

Sacyr (VHM.F) has not paid dividends consistently over the last 25 years. Looking at the dividend per share data provided from 2004 to 2023, there were multiple years where dividends were either not paid at all (such as 2008, 2009, 2010, 2012, 2013, 2014, and 2016) or offered minimal returns. Furthermore, the highest dividend of 0.6 per share was paid in 2008 but has fluctuated considerably since then. This irregularity signifies underlying financial challenges or strategic realignments affecting the company's ability to provide stable returns to its shareholders. While the recent years (2019-2023) show an upward trend in dividends, the inconsistency over the broader timeframe undermines confidence in its long-term dividend reliability. Therefore, Sacyr does not meet the criterion of having a robust 25-year dividend payment history and this trend should be viewed as a negative in terms of dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases Over the Past 20 Years

In evaluating the reliability of stock repurchases over the past 20 years for Sacyr (VHM.F), the trend exhibits variability. The number of shares remained steady at 645,756,868 up until 2013, when it significantly reduced to 0 shares from 2013 to 2016. Instructors observed a subsequent fluctuation with shares going down to approximately 532,688,131 in 2017 before rising again to 645,756,868 by 2023. With only one year, 2013, identified as a year of repurchase, the average repurchase rate of -4.2299 signifies an overall increase in the number of shares, which typically indicates an issuance of shares rather than repurchase. This trend is typically assessed poorly as consistent buybacks are a sign of strong shareholder returns and an indication of excess cash flow utilized to enhance shareholder value. Thus, for Sacyr (VHM.F), the inconsistent and negligible significance of stock repurchases reveals poor reliability in this domain.