Last update on 2024-06-28

Verisk Analytics (VRSK) - Dividend Analysis (Final Score: 5/8)

Analyze the dividend policy of Verisk Analytics (VRSK) using an 8-point criteria system to evaluate policy performance and stability. Final score: 5/8.

Short Analysis - Dividend Score: 5

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

Verisk Analytics (VRSK) received a dividend score of 5 out of 8 based on their current dividend policy assessment. Here's a breakdown: 1. **Dividend Yield**: VRSK's current dividend yield of 0.5694% is below the industry average of 1.83%. The yield has shown gradual growth but remains unimpressive. 2. **Dividend Growth Rate**: VRSK started paying dividends in 2020, but the growth is inconsistent and below the 5% average annual growth rate. 3. **Payout Ratio**: VRSK has an impressively low average payout ratio of 7.90%, well below the 65% threshold, indicating strong earnings retention for growth. 4. **Earnings Coverage**: VRSK's dividends are well covered by their earnings, despite some fluctuations in EPS. 5. **Cash Flow Coverage**: The company's cash flow comfortably covers their dividend payouts, signaling reliability. 6. **Dividend Stability**: VRSK hasn't been paying dividends long enough to assess true stability but has shown a stable trend since 2019. 7. **History of Payments**: They have only been paying dividends for 5 years (since 2019), which is far short of the 25-year benchmark for long-term reliability. 8. **Stock Repurchases**: No specific data was provided regarding reliable stock repurchases over the past 20 years.

Insights for Value Investors Seeking Stable Income

The mixed results in Verisk's dividend scorecard suggest that it may be a stock for those with a higher tolerance for risk. While its earnings retention and cash flow coverage are strong, the short history and low dividend yield may deter income-focused investors. If you prioritize capital appreciation and can tolerate lower immediate income, Verisk might be worth a look. However, if you need reliable and higher dividend income, you might want to explore other options.

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 for investors as it reflects the company's ability to generate income from its shareholdings in the form of dividends relative to its stock price.

Verisk Analytics (VRSK) has a current dividend yield of 0.5694%, which is significantly below the industry average of 1.83%. This is generally viewed negatively, as it indicates that VRSK offers less income relative to its stock price compared to its peers. Over the past decade, VRSK's dividend yield has shown gradual growth from 0.6696% in 2019 and fluctuated around 0.5-0.7%, but it has never surpassed the industry average during this period. Given VRSK's increasing stock price, from $30.28 in 2009 to $238.86 in 2023, the relatively low yield suggests that the stock price appreciation has outpaced dividend growth. Though the company has been increasing its dividends per share from $1.00 in 2019 to $1.36 in 2023, it does not sufficiently compensate for the higher stock price, resulting in a yield below industry standards.

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

The Dividend Growth Rate measures how the company's dividend payouts have increased over time and is critical for investors seeking income potential.

Analysing Verisk Analytics' dividend per share from the given figures for the years 2006 to 2023, it is clear that the company did not start paying dividends until 2020. Since then, the dividend has fluctuated but shows a general upward trend from 8 in 2020 to approximately 9.6774 in 2023. However, the average dividend ratio over this period is around 1.78%. Hence, given only a brief dividend payout history and a significantly fluctuated growth, Verisk Analytics does not exhibit a consistent Dividend Growth Rate above 5% over the last 20 years. This trend might be considered unfavorable for investors prioritizing consistent and robust dividend growth.

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

The Average Payout Ratio is calculated as the average proportion of earnings paid out as dividends to shareholders. A lower payout ratio, typically under 65%, indicates that the company retains enough earnings to reinvest in its growth and operations, which is crucial for its long-term financial health.

From the data provided, Verisk Analytics (VRSK) has a strikingly low Average Payout Ratio of 7.90% over the significant span of years from 2006 to 2023. Additionally, it never exceeded 36.35% in any given year, substantially below the 65% threshold. This low payout ratio illustrates a robust retention of earnings, which suggests that the company has consistently been reinvesting its profits into its own business rather than distributing the majority as dividends. This cautious and growth-oriented approach is favorable for the company’s financial sustainability and long-term growth. Hence, this trend is very good for investors seeking capital appreciation over time, potentially combined with modest dividend income.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings refer to how easily a company can pay its dividends using its earnings. This criterion is essential because it ensures the sustainability of the dividends without stressing the company's financials.

Verisk Analytics shows an interesting trend when examining the coverage of dividends by earnings. Before 2019, Verisk did not pay any dividends despite having positive earnings per share (EPS). From 2019, the company started to issue dividends, with a progressive increase each year from $1 in 2019 to $1.36 in 2023. Conversely, EPS shows significant variability, peaking at $6.0435 in 2022 before dropping to $4.1903 in 2023. The dividend coverage ratios from 2019 to 2023 are 0.36, 0.25, 0.28, 0.21, and 0.32 respectively, indicating that the dividends remain well covered by earnings albeit the variation. The reduced coverage ratio in 2020 (0.21) and 2021 (0.28) is notable but not alarming given robust EPS. Overall, the trend reflects a commitment to rewarding shareholders while maintaining prudent financial management, a positive indicator for investors.

Dividends Well Covered by Cash Flow?

Examining whether dividends are covered by the company's cash flow is vital, as insufficient cash flow might indicate that the dividend is unsustainable.

Verisk Analytics (VRSK) has shown a substantial free cash flow growth from 2006 to 2023, increasing from $0 to over $830 million. In contrast, its dividend payout started in 2016 with $163.5 million and slightly increased to $196.8 million in 2023. The ratio of dividend covered by cash flow has been above 0.2 since dividends were first paid, indicating a comfortable coverage. This trend reflects a reassuring scenario for investors as the company generates sufficient cash flow to cover its dividends. Therefore, this trend is quite positive for the sustainability of Verisk's dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Verisk Analytics (VRSK) and why it is important to consider

Stable dividends over the past 20 years are crucial for income-seeking investors as they seek reliability and predictability in their earnings. A drop of more than 20% at any point would indicate instability, raising a red flag for those reliant on consistent dividend payments.

Dividends Paid for Over 25 Years?

Discuss whether Verisk Analytics (VRSK) has been paying dividends for over 25 years and explain the importance of this criterion in dividend analysis.

The given data shows that Verisk Analytics started paying dividends in 2019 with a dividend per share of $1.00. This has progressively increased to $1.36 in 2023. Although the company's dividends have shown growth, they have been paid for only 5 years, not 25 years. This trend is not sufficient to satisfy the criterion of having paid dividends for over 25 years, which might be a critical factor for investors seeking long-term stability and reliable income sources from their investments.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Verisk Analytics (VRSK) and why it is important to consider

A company's ability to reliably repurchase its own stock over an extended period can signal a strong commitment to enhancing shareholder value. Such repurchase programs benefit shareholders directly through share price appreciation driven by reduced supply and demonstrate effective capital management.