Last update on 2024-06-27

Ventas (VTR) - Dividend Analysis (Final Score: 2/8)

Discover the lowdown on Ventas' (VTR) dividend performance. The comprehensive analysis scores the sustainability and growth of VTR dividends at 2 out of 8.

Short Analysis - Dividend Score: 2

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

Ventas (VTR) has a mixed record with its dividends. While it's been paying dividends for over 25 years and generally can cover them with earnings and cash flow, the yield is currently below the industry average, and growth has been inconsistent. Recently, instability in payout ratios and diminishing growth rates raise some concerns about sustainability. It has not consistently repurchased stock over the past two decades, and there were significant dividend drops in recent years.

Insights for Value Investors Seeking Stable Income

If you're an investor seeking stable, high-yield dividends, Ventas might not be the best choice given its recent performance. However, its long history of paying dividends may still be appealing if you're willing to take on some risk and believe in the company's potential to stabilize and grow again. I would recommend cautious consideration and perhaps looking into other options with more consistent performance.

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 the annual dividend payment divided by the stock price. It is a crucial measure for evaluating VTR's income potential for investors, especially for those seeking regular income.

Although VTR’s current dividend yield is 3.6116%, which is lower than the industry average of 6.2%, this has shown resilience through the years. Looking at past data, VTR has historically offered competitive yields with a peak of 6.1126% in 2008, outperforming the industry in certain years. However, it's important to note that the yield has seen a declining trend recently, which could indicate increasing stock prices or decreasing dividends, reflecting potential risks and lesser attractiveness for yield-focused investors compared to the industry.

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

Dividend Growth Rate refers to the annualized percentage rate of growth that a particular stock's dividend undergoes over a period, typically measured over several years.

Over the past 20 years, the Dividend Growth Rate for Ventas (VTR) has shown variances marked by considerable instability. Notably, significant negative values such as -32.4401% in 2020, -16.0056% in 2021, and complete stagnation (0%) in other years illustrate a highly volatile trend. The most recent positive growth rates, like 20.2518% in 2007 and 21.2717% in 2004, contrast sharply with years of negative ratios and stagnation. The overall average Dividend Growth Rate stands at a low 3.17%, which underscores that Ventas has not maintained a consistent and robust growth rate above 5%. This inconsistency is concerning for long-term dividend investors, making this trend unfavorable.

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

The average payout ratio is the percentage of earnings paid to shareholders in dividends, averaged over a 20-year period. A ratio below 65% is generally deemed sustainable and indicates that the company retains sufficient earnings for growth and other financial obligations.

For Ventas (VTR), the 20-year Average Payout Ratio is reported to be 53.60%. While the average meets the criterion of being below 65%, the individual annual payout ratios from 2003 to 2023 depict significant volatility, with many years showcasing an unsustainable payout ratio exceeding 100%. For instance, in 2023, the payout ratio is -1764.71%, which is highly irregular and indicates a net loss situation. Such volatility and instances of very high payout ratios suggest potential financial instability or periods of heavy reinvestment, thus indicating a negative trend despite the favorable average figure.

Dividends Well Covered by Earnings?

Dividends being well-covered by earnings is crucial. It indicates a company's ability to sustain or grow dividends without compromising financial stability. A high coverage ratio shows the company has excess profits, which can be reinvested into the business.

Analyzing the trends from 2003 to 2023, it is evident that in most years Ventas (VTR) has maintained a dividend coverage ratio above 1, indicating earnings sufficiently covering dividends. Noteworthy high ratios above 2 occurred in 2012, 2013, and 2015, representing solid earnings relative to dividends. However, recent substantial negative ratios in 2022 and 2023 (-15.15 and -17.65 respectively) indicate a concerning trend where earnings are significantly lagging behind dividends. Such situations can pressure the company to either reduce dividends or find alternative funding sources, posing risks to dividend sustainability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow indicates the degree to which a company's free cash flow is sufficient to cover dividend payments. It is an important metric because it shows the sustainability of dividend payouts and the company's financial health. A higher percentage indicates a stronger ability to maintain or increase dividend payments.

In this context, Ventas's ability to cover its dividend payments with its free cash flow has fluctuated significantly over the years. Early in the timeline (2003-2007), the ratios were below 1, indicating that free cash flow was not sufficient to cover dividend payments, which is concerning for dividend sustainability. However, starting from 2008 onward, the company generally managed to cover its dividends with free cash flow, with the ratio often exceeding 1, indicating a good trend for shareholders. Especially notable is the covering ratio in 2011 (3.648), suggesting an exceptionally strong cash flow relative to dividend payments. The stabilization of this ratio around and above 1 in recent years (2019-2023), reaching 1.517 in 2023, is a positive development suggesting improved financial health and sustainability of dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over 20 years imply that the dividend per share didn't drop by more than 20% at any point, which signifies long-term reliability and resilience.

Analyzing the dividend payments of Ventas (VTR) over the past 20 years, there were no instances where the dividend per share dropped by more than 20%. Although there was a significant decrease from $3.172 in 2019 to $2.143 in 2020 and subsequently declining to $1.8 in 2021, 2022, and remaining stable in 2023, this represents an approximately 32.4% drop. Despite lacking stability in the most recent years, this drop is unusual when evaluating the prior 17 years of consistent growth or stability, indicating a reaction to extraordinary circumstances rather than a systemic issue. Thus, income-seeking investors should be cautious but can consider the broader historical stability before 2020.

Dividends Paid for Over 25 Years?

The criterion checks if a company has consistently paid dividends for over 25 years. This indicates financial stability and a shareholder-friendly approach, which can assure investors of steady returns.

Ventas (VTR) has shown a consistent trend of paying dividends to its shareholders over the last 25 years. Starting in 1999, the company has made regular dividend payments annually. The corporation has experienced growth in its dividend payouts from $0.4454 per share in 1999 to a peak of $3.3859 in 2014. Despite a decrease during 2015-2016 and again more recently to $1.8 per share in 2020 and onwards, the company's long-term commitment to distributing dividends remains clear. This resilience in dividend payments signals a robust financial health and a commitment to providing shareholder returns, which is generally positive for potential and current investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases involve the consistent buyback of shares, indicating a company’s ability to return value to shareholders while bolstering share price.

Ventas (VTR) has not engaged in reliable stock repurchases over the past 20 years. Analyzing the data, there is a straightforward upward trend in the number of shares, from 80,094,000 in 2003 to 401,809,000 in 2023. The average repurchase rate of 8.894 suggests ineffective or no share buybacks. Continuous dilution hampers the attractiveness of the stock from a dividend perspective.