Last update on 2024-06-27

Vonovia (VNA.DE) - Dividend Analysis (Final Score: 4/8)

Analyse of Vonovia's dividend policy using an 8-criteria scoring system for performance and stability, resulting in a final score of 4 out of 8.

Short Analysis - Dividend Score: 4

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

Vonovia (VNA.DE) was evaluated based on an 8-criteria scoring system aiming to assess its dividend policy's performance and stability. Receiving a modest score of 4 out of 8, the analysis highlights significant details. Vonovia's dividend yield of 2.9783% slightly trails the industry average of 2.99%, with historical volatility in its yield and stock price. The company's dividend growth rate over the last 20 years shows inconsistencies, reflecting periods of high growth interspersed with sharp declines. The average payout ratio is a very low 7.03%, but with considerable fluctuations in some years, sometimes exceeding 65%. Moreover, dividends have shown questionable sustainability in recent years, as evidenced by inconsistent coverage with earnings and cash flow. Notably, Vonovia has paid dividends since 2014, marking a brief history compared to the desired 25-year threshold. There were no stock repurchases over two decades, further flagging concerns about shareholder returns.

Insights for Value Investors Seeking Stable Income

Given the mixed performance and substantial recent declines in dividend coverage and stability, potential investors are advised to approach Vonovia (VNA.DE) with caution. The fluctuating payout ratios and the inconsistency in dividends suggest potential financial vulnerabilities. Long-term income-focused investors might find the short history and dividend volatility unappealing. While there are periods of strong performance, the lack of stock repurchases and the failing criteria for sustained dividend payments raise red flags. Thus, a deeper and more cautious evaluation is recommended before considering investment in Vonovia for steady dividend income.

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 how much a company pays out in dividends each year relative to its stock price, showcasing the income generated.

Vonovia's current dividend yield of 2.9783% is marginally below the industry average of 2.99%. Reviewing the historical data, Vonovia historically traded without a dividend yield before 2014 but consistently delivered a yield since then, peaking at 7.4937% in 2022. The declining yield in 2023 could indicate either a stock price appreciation or a reduction in dividend payments. For context, Vonovia's stock price has undergone volatility, peaking at €59.76 in 2020 then dramatically reducing to €28.54 in 2023. Regardless, the company maintains a relatively strong yield signaling a steady income flow, albeit monitoring near-industry average performance.

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

Dividend growth rate criterion refers to the annualized percentage rate of growth of a company’s dividend payments over a specified period. It is crucial as it indicates the company's historical commitment to increasing shareholder value.

Based on the provided data, the dividend per share ratio had significant fluctuations over the years. Notably, there were periods of extreme growth as seen in 2016 (118.0556%) contrasted by sharp declines, exemplified by 2021 (-46.1783%) and 2023 (-48.4877%). Such volatility obscures the reliability of sustained dividend growth. The calculated average dividend ratio is 5.2%, slightly just over 5%, signaling a modest average growth over two decades. However, given the erratic year-on-year changes, Vonovia's dividend growth's sustainable stability is questionable, lending a mixed perspective.

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

The Average Payout Ratio assesses the proportion of earnings that a company returns to its shareholders as dividends. A lower ratio is often seen as a sign of sustainability.

Vonovia's average payout ratio over the last 20 years is approximately 7.03%, well below the 65% threshold. This very low average can be attributed to the fact that for most of the years, especially from 2005 to 2013, the payout ratio was actually 0%. In some recent years, the payout ratio has exceeded 65%, notably in 2019 and 2020. Notably, the payout ratio in 2022 was significantly negative at -206.4184%, indicating a financial anomaly. On the whole, maintaining a payout ratio consistently below 65% is favorable, but the dramatic fluctuations require further scrutiny to assess the sustainability and predictability of future payouts.

Dividends Well Covered by Earnings?

Why it is important for dividends to be well covered by the earnings

Earnings per share (EPS) and dividends per share (DPS) reveal a lot about a company's financial health. For Vonovia, over the years EPS fluctuated widely, peaking at 5.1435 in 2017 and plummeting to -7.6298 in 2023. In contrast, DPS showed consistent growth until peaking at 3.14 in 2020 before falling to 0.85 in 2023. However, the EPS to DPS coverage ratio is volatile, showing well-covered dividends in early years, but dipping significantly in recent years, implying a worrying trend of unsustainable dividend payouts. Particularly concerning are the negative coverage ratios in 2022 and 2023, suggesting that the dividends paid out were not covered by earnings, thus unsustainable. This structural weakness should raise red flags for investors. This trend is troubling, indicating potential vulnerability in Vonovia's dividend policy if earnings do not recover.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow

Interpreting the data from 2005 to 2023, we notice that from 2005 to 2012, there were no dividend payouts, and thus no coverage by cash flow. The ratio first appeared in 2012, showing gradual improvement until peaking at above 50% in 2016. Post-2017, the coverage ratio fluctuated with a declining trend, reaching a low in 2019 and witnessing minor improvements thereafter, but dropped to zero in 2023. This trend signals an inconsistent coverage, with an especially concerning dip in 2023, making the sustainability of dividends questionable in recent times. Such variability indicates that while some dividends were well-covered in years of higher free cash flow, the absence of payouts in 2023 raises red flags regarding financial health.

Stable Dividends Since the Company Began Paying Dividends?

Why it is important to consider the stability of dividends over the past 20 years for a company like Vonovia (VNA.DE).

The stability of dividend payments is crucial for income-seeking investors as it reflects a company's financial health and its ability to generate consistent cash flows. Vonovia (VNA.DE) has shown a mixed performance over the past 20 years, with a significant drop in the dividend per share observed in 2023 (declining to 0.85 from 1.6501 in 2022 and 3.14 in 2020). This inconsistency can be troublesome for income-focused investors. Nevertheless, periods of stable and growing dividends, as seen from 2014 to 2020, indicate phases of strong performance and commitment to shareholder returns. Maintaining stable or gradually increasing dividends is generally perceived as a positive indicator for a company.

Dividends Paid for Over 25 Years?

The criterion examines if the company has consistently paid dividends for over 25 years, which is an indicator of financial health and commitment to shareholder returns.

Vonovia (VNA.DE) has documented dividend payments only since 2014, indicating a relatively short history of distributing returns to its shareholders, roughly around 9 years. The dividends varied, starting at €0.70 per share in 2014 and peaking at €3.14 per share in 2020 before declining to €0.85 per share in 2023. This indicates the company does not meet the criterion of paying dividends for over 25 years, which could be a red flag for investors seeking long-term dividend consistency. The recent decline in dividends suggests potential difficulties in sustaining high dividend payouts, further raising concerns about maintaining future dividends. This trend might be considered unfavorable, especially for conservative, income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases are considered a form of returning value to shareholders. Companies that reliably buy back shares are often seen as confident in their own growth, and repurchases reduce the number of outstanding shares, increasing earnings per share.

Vonovia has not engaged in any stock repurchases over the past 20 years, as indicated by the data showing consistent or increasing number of shares each year with 'reliable repurchased years' listed as an empty array. Instead, the number of outstanding shares has grown notably, for example, increasing from around 241 million in 2010 to over 823 million by 2023. This upward trend in share issuance might be due to re-investments in growing the company or potential capital raising through equity. However, from a dividend investor's perspective, this lack of buybacks could be seen as a negative trend as it dilutes existing shareholders' stakes, which is generally unfavorable for dividend growth.