Last update on 2024-06-27

Westinghouse Air Brake Technologies (WAB) - Dividend Analysis (Final Score: 6/8)

Assess Westinghouse Air Brake Technologies (WAB) dividend performance using an 8-criteria scoring system. Final Score: 6 out of 8 showing stability and growth potential.

Short Analysis - Dividend Score: 6

We're running Westinghouse Air Brake Technologies (WAB) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Westinghouse Air Brake Technologies (WAB) received a dividend score of 6 out of 8 based on an extensive analysis of its dividend policy. Despite showing a higher-than-average dividend yield of 0.5359% compared to its historical performance, the yield remains lower than the industry average of 1.47%. The Dividend Growth Rate, which averaged an annual increase of 22.12% over 20 years, displayed high volatility with some years of negative growth. The Average Payout Ratio was low at 9.05%, indicating sustainable dividends. Dividends were well-covered by both earnings and cash flow, exhibiting the company's strong financial footing. WAB showed a consistent but steadily increasing dividend trend over the last two decades, though with a notable decrease in 2018. The company has maintained a dividend-paying history for over 25 years. However, stock repurchase activity has been inconsistent and opportunistic without clear regularity.

Insights for Value Investors Seeking Stable Income

Westinghouse Air Brake Technologies (WAB) appears to be financially stable with sustained dividends supported by both earnings and cash flow, making it reliable for income-seeking investors. However, the lower-than-industry-average dividend yield and occasional volatility in dividend growth may be drawbacks for those prioritizing high and consistent income. The inconsistent stock repurchase suggests a strategic rather than regular capital return to shareholders. Overall, WAB appears to be a good investment for those looking for long-term growth and stability, despite its conservative dividend policies.

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?

Explain the criterion for Westinghouse Air Brake Technologies (WAB) and why it is important to consider

The current dividend yield for Westinghouse Air Brake Technologies (WAB) stands at 0.5359%, which is notably higher than its historical averages but lower compared to the industry average of 1.47%. Evaluating the company’s dividend yield over the last two decades, WAB's dividend yield shows an overall increasing trend, starting from as low as 0.02% in 2003 to its current level. This is tied to the fact that while the company’s stock price has increased significantly (from $8.52 in 2003 to $126.9 in 2023), the increments in dividend per share have not been as aggressive (from $0.02 in 2003 to $0.68 in 2023). Compared to the industry average, WAB’s yield has consistently been lower, indicating less aggressive dividend policies. This yield trend can be both positive and negative. On the positive side, the increasing dividend payout reflects growth and confidence in steady income distribution. However, the lower yield compared to the industry metric and incremental growth suggests a potential overvaluation in stock price or a focus on retaining earnings for reinvestment rather than higher dividend payouts. Investors prioritizing income might see this as a disadvantage, although those seeking capital growth might still find it attractive.

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

Examine the Dividend Growth Rate over a 20-year period and its importance in assessing the dividend potential and stability.

The Dividend Growth Rate for Westinghouse Air Brake Technologies (WAB) shows significant variability, with negative growth in some years (-14.2857% in 2018) and no dividends in others. Despite some high growth years such as 2013-2014 (62.5%) and 2017-2018 (55.5556%), the average dividend growth rate over 20 years is only 22.1200%. While this average is above 5%, the inconsistency and occasional negative growth indicate volatility and potential risks. Hence, this trend is not entirely promising for long-term dividend stability.

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, typically expressed as a percentage.

The Average Payout Ratio for Westinghouse Air Brake Technologies (WAB) over the last 20 years is 9.05%. This is well below the 65% threshold, indicating a good trend for shareholders looking for sustainable dividends. The consistently low payout ratios imply that the company has been prudent in retaining earnings for growth and other opportunities, making it financially stable and reducing risk for dividend cuts. The trend of gradually increasing but still conservative payout ratios reflects a balanced approach to rewarding shareholders while ensuring financial flexibility.

Dividends Well Covered by Earnings?

The ratio of dividends to earnings (also known as the dividend coverage ratio) is crucial as it indicates how comfortably a company can pay dividends from its net income. Higher coverage ratios suggest that the company can sustain its dividend payouts or even increase them, which is attractive to investors looking for reliable income streams.

The dividend coverage ratio for Westinghouse Air Brake Technologies (WAB) over the years has shown a stable upward trend, improving from as low as 0.034 in 2005 to 0.149 in 2023. However, these figures seem unusually high due to an interpretation error; coverage above 1 is uncommon in standard financial metrics. Revisiting the valid metric interpretation, earnings have consistently covered and well exceeded dividend requirements. In 2023, with an EPS of 4.5582 and a dividend per share of 0.68, the coverage ratio would reasonably imply the company's dividends are 6.7x times covered. Despite dips in EPS such as in 2017 (€2.7283) and 2019 approx (€1.9161), the dividends remained managed, indicating sound financial strategies even in less profitable years. Thus, WAB has assured footing in comfortably distributing dividends, signaling strong fiscal health and reliability for long-term investors.

Dividends Well Covered by Cash Flow?

What does it mean when a company's dividend is well covered by its cash flow and why is it important?

When a company's dividend is well covered by its cash flow, it indicates that the company generates enough cash to not only cover its operating expenses and capital expenditures but also to comfortably pay its dividend to shareholders. This is crucial because it reflects a company's financial health and its ability to sustain or even grow dividend payouts without jeopardizing its financial stability.

Stable Dividends Since the Company Began Paying Dividends?

Dividend stability is vital as it demonstrates a company's consistent financial health and commitment to shareholders.

Westinghouse Air Brake Technologies (WAB) has shown a general trend of increasing dividends over the past two decades. Starting from $0.02 per share in 2003, there has been a steady, albeit gradual, increase up to $0.68 per share in 2023. However, there was a notable exception in 2018 when the dividend dropped from $0.56 per share to $0.48 per share, a decrease of approximately 14%. While this does not meet the 20% drop threshold, it is still a reduction. Overall, the trend of dividend growth is strong and favorable, though the decline in 2018 merits attention. The continued growth after this drop indicates resilience.

Dividends Paid for Over 25 Years?

Examining if dividends have been consistently paid for over 25 years helps verify the company's stability and commitment to returning value to shareholders.

Westinghouse Air Brake Technologies (WAB) has demonstrated a remarkable consistency in paying dividends over the past 25 years. From 1998 to 2009, the company maintained a steady dividend per share of $0.02. Subsequently, there has been a noticeable and encouraging trend of increasing dividends from 2011 onwards. For instance, in 2013, the dividend per share was $0.13, which steadily increased to $0.68 by 2023. This upward trend reflects positively on WAB’s financial health and its commitment to shareholder returns. It suggests a robust ability to generate free cash flows necessary for such consistent payouts. Overall, this trend is very positive, illustrating long-term financial stability and shareholder focus.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases refer to the consistent acquisition of its own shares by a company over a given period.

Examining Westinghouse Air Brake Technologies (WAB)'s repurchase history over the past 20 years reveals a sporadic pattern rather than a consistent one. The company has executed stock repurchases in only 6 of the last 20 years; specifically in 2008, 2009, 2016, 2021, 2022, and 2023. This infrequency indicates an average repurchase rate of approximately 4.599 times in this period. The number of shares repurchased varied considerably, with significant buybacks in certain years like 2016 (a reduction from 97,006,000 in 2015 to 91,141,000) and 2021-2023. Although these share repurchases show some commitment towards returning value to shareholders, the lack of regularity suggests that WAB's repurchasing program may be driven by opportunistic strategies rather than a reliable, predictable policy, which could be seen as either positive for its strategic flexibility or negative for those seeking predictable and consistent capital return mechanisms.