Last update on 2024-06-27

Veolia Environnement (VVD.DE) - Dividend Analysis (Final Score: 5/8)

Veolia Environnement (VVD.DE): Comprehensive 2023 dividend analysis with a final score of 5/8, examining stability, growth, and yield.

Short Analysis - Dividend Score: 5

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

The analysis of Veolia Environnement’s dividend policy used an 8-criteria scoring system, giving the company a dividend score of 5. These criteria include dividend yield, growth rate, payout ratio, earnings coverage, stability, history, and stock repurchases. Veolia boasts an attractive dividend yield significantly higher than the industry average. However, its dividend growth rate over the past 20 years is below the desired 5%, pointing to inconsistent dividend payments. The average payout ratio suggests prudent financial management even amid extremely high or negative ratios some years, indicating possible financial instability during those periods. Earnings have occasionally been insufficient to cover dividends, further highlighting erratic financial performance. Despite the unique volatility in its annual figures, Veolia has shown stable to increasing dividends post-2008, but lacks the long history of 25 years of steady payments. The company’s commitment to stock repurchases over the last 20 years wasn’t elaborately discussed but remains an essential financial health indicator.

Insights for Value Investors Seeking Stable Income

Given Veolia's mixed dividend performance, it can be considered for investment if you prioritize high yields and can tolerate inconsistencies in growth and coverage. It's crucial to conduct additional research into the company's recent financial health and future earnings projections. This stock may suit income-seeking investors who can withstand periodic volatility. However, investors desiring stable and predictable dividend returns could perceive the frequent fluctuations and lack of a 25-year history as drawbacks. Thus, weigh its potential benefits against your investment strategy and risk tolerance.

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 the cash return on investment to shareholders through dividends. A higher yield can be an attractive passive income streams.

Veolia Environnement (VVD.DE) maintains a dividend yield of 3.9038%, significantly higher than the industry average of 1.76%. Analyzing historical data, the dividend yield achieved a peak at an astonishing 14.06% in 2011 due to a plummeted stock price. Although highly volatile, Veolia's dividend yield consistently outperforms its peers. Notably, the stable dividend per share underscores management's divine priority on shareholder returns. Historically, a robust dividend yield despite market volatility magnetizes income-focused investors, markedly beneficial for overall appeal and share price stability.

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

The Dividend Growth Rate (DGR) is the annualized percentage rate of growth of a company's dividend over the last 20 years. A DGR higher than 5% indicates strong and steady financial performance, suggesting that the company is profitable and confident in its future earnings.

The average dividend ratio for Veolia Environnement over the last 20 years is 1.688%. The data provided shows inconsistent dividend payments, with some years having very high negative or positive values, and others with zero dividends. Specifically, the negative values occurred in 2012 (-42.1488) and 2020 (-45.6522) indicating either dividend cuts or financial struggles. The occasional high values, such as 42.8571% in 2022, suggest some years with exceptional payouts which could be linked to strong financial performance or special dividends. Despite these fluctuations, the average dividend ratio of 1.688% is well below 5%, indicating poor historical growth in dividend payments, which is a concerning trend for dividend-focused investors.

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

The payout ratio is the proportion of earnings paid out as dividends to shareholders, normally expressed as a percentage. A payout ratio lower than 65% indicates that the company retains a significant portion of its earnings for growth, debt repayment, or other purposes, which is generally seen as healthy and sustainable.

The average payout ratio for Veolia Environnement over the last 20 years stands at 58.26%, which is below the 65% threshold. This would generally be a positive sign suggesting prudent financial management. However, it’s important to note that certain years, such as 2008, 2011, 2013, 2014, and particularly 2020, had extraordinarily high or negative payout ratios. These extreme fluctuations highlight potential underlying financial instability or extraordinary circumstances that might have impacted net income during those periods. Therefore, while the average payout ratio over two decades is within the desired range, the volatility across the individual years suggests that investors should look deeper into the reasons behind these variances.

Dividends Well Covered by Earnings?

Dividends that are well covered by earnings indicate financial stability and sustainability. It reflects the company's ability to generate enough profit to support its dividend payments.

Assessing the historical trend of Veolia Environnement's EPS and DPS from 2003 to 2023, the EPS are highly variable, reaching its peak at 2.1359 in 2007 but also experiencing negative values, such as -5.0521 in 2003. The variability presents a significant fluctuation in the coverage ratio, with some years showing a negative coverage (e.g., -2.707930367504835 in 2013), highlighting that earnings occasionally did not suffice to cover the dividends. In 2020, the EPS plummeted to 0.1543, leading to an exceedingly high coverage ratio of 3.240440699935191 due to reduced DPS. Although the latest figures show an improvement in 2022, achieving a coverage ratio of around 0.961, consistent and positive EPS is essential for a stable dividend policy. The inconsistent earnings trend implies short-term financial instability, making it crucial for potential investors to consider the risk of insufficient dividend coverage in certain years.

Dividends Well Covered by Cash Flow?

Explanation for Dividends Well Covered by Cash Flow in relation to Veolia Environnement.

The interpretation should use the provided Free Cash Flow and Dividend Payout amount data from 2003 to 2023. Provide specific year-wise insight to discuss if this trend is positive or negative.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years

Analyzing the dividend per share of Veolia Environnement from 2003 to 2023, one can observe that the dividends have maintained a reasonable level of stability. Notably, in the early years from 2003 to 2007, there were no dividends declared. This is important context to consider. From 2008 onwards, the dividends were consistently paid out, although there was a significant cut in 2012, where the dividend dropped from 1.21 EUR to 0.7 EUR, marking a decrease of nearly 42%. This trend shows a return to growth in recent years, reaching a high of 1.12 EUR in 2023, which is higher than the historical average post-2008. Given that the dividends were only halved once in the last two decades, and have otherwise increased or remained steady, the situation is somewhat favorable for income-seeking investors. Although the decrease in 2012 is a point of concern, the resurgence in dividends post-2015 compensates for that dip.

Dividends Paid for Over 25 Years?

Assessing whether a company has consistently paid dividends over 25 years demonstrates its financial stability and commitment to returning value to shareholders.

Veolia Environnement has paid steady dividends only since 2008, when it issued a dividend of €1.21 per share. Before that year, no dividends were reported. This means that the company has not yet established a dividend payment history of 25 consecutive years. The absence of dividends from 1999 to 2007 suggests either the company had not prioritized dividend payouts or it had other financial commitments. While the more recent trend shows an increase in dividend payments—from €0.7 per share in 2012 to €1.12 per share in 2023—the lack of a 25-year history could be seen as a drawback when compared to companies with a longer record. This trend indicates a positive recent outlook, but doesn't meet the 25-year criterion, meaning it's neither particularly advantageous nor disadvantageous, but it does indicate a certain level of stability over the past decade and a half.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Veolia Environnement (VVD.DE) and why it is important to consider

The criterion of reliable stock repurchases over the past 20 years pertains to the company’s ability to buy back its own shares consistently and significantly. Stock repurchases can be a positive indicator because they signal management's confidence in the business's future, reduce the number of shares outstanding which can boost EPS (Earnings Per Share), and return excess cash to shareholders. This action is generally perceived as a sign of good financial health and effective capital allocation.