Last update on 2024-06-27

Werner Enterprises (WERN) - Dividend Analysis (Final Score: 6/8)

In-depth dividend analysis of Werner Enterprises (WERN) with a final score of 6/8. Learn about dividend performance, stability, yields, and growth trends.

Short Analysis - Dividend Score: 6

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

Werner Enterprises (WERN) was evaluated on an 8-criteria scoring system to assess the performance and stability of its dividend policy. The score registered was 6 out of 8. Notable findings include: - The dividend yield is currently 0.6372%, below the industry average of 0.67%, accompanied by considerable historical volatility. - The dividend growth rate averaged 107.07% over the past 20 years, although it's marked by year-to-year inconsistency. - The average payout ratio over 20 years is a low and sustainable 54.9%. - In recent years, dividends have been well-covered by earnings, but not consistently by free cash flow. - Werner has experienced times of instability in dividend payments, with significant variances greater than 20%. - Dividends have been paid for over 25 years, showing commitment and relative stability. - The company has consistently repurchased shares over the last 20 years, enhancing shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Werner Enterprises (WERN) shows both strengths and risks. The long-term dividend payments and reliable stock repurchase program are positive signs. However, the considerable fluctuations in dividend yield, growth rate, and inconsistencies in covering dividends with free cash flow indicate potential volatility and risk. For income-focused investors seeking steady and predictable dividends, WERN might not be the best choice. However, for those looking at long-term value appreciation and willing to stomach some instability, it could offer worthwhile prospects. Therefore, a balanced consideration of the potential risks and rewards should be made before investing in WERN.

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 measure of a company's annual dividend relative to its share price. It provides investors with an idea of the income they might earn by holding the stock.

Werner Enterprises (WERN) currently has a dividend yield of 0.6372%, which is slightly below the industry average of 0.67%. Over the past 20 years, the company's dividend yield has shown considerable volatility, ranging from 0.4156% in 2003 to 13.2641% in 2008. More recently, yields have returned to more modest levels, yet they continue to display significant fluctuation when compared to the industry average, which has remained relatively stable with occasional peaks and troughs (e.g., 7.72% in 2020 and 6.67% in 2021). Given the volatility of Werner's dividend yield, investors may find it challenging to predict future income, marking this trend as a potential risk factor. Despite occasional higher yields, particularly in certain years, the current yield being lower than the industry average might indicate lower income potential for investors, unless consistent dividends and growth are assured.

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

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth of a company's dividend over a given period. A consistent growth rate of above 5% is considered strong as it indicates the company's profitability and financial health.

Upon examining Werner Enterprises' dividend per share growth rate over the past 20 years, it's apparent that the company exhibits extreme fluctuations. With growth rates ranging from as high as 1110.5263% in 2008 to sharp declines like -88.2353% in 2013, the average stands at 107.07%. While the average DGR exceeds 5%, the inconsistency year over year suggests volatility. This inconsistency could be alarming for investors focused on stability in dividend income. The trend shows that though Werner Enterprises often increases its dividends significantly, it is also prone to substantial reductions, making it less reliable for dividend-focused investors seeking steady income growth.

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

The average Payout Ratio measures the proportion of earnings paid out as dividends to shareholders. A ratio below 65% is generally considered sustainable and indicates financial stability and prudence in dividend policy.

The average payout ratio for Werner Enterprises over the past 20 years is approximately 54.9%, which is below the 65% threshold. Despite some spikes in individual years, such as 2008 (243.88%) and 2009 (184.69%), the overall trend is good. These extreme values likely correspond to unusual financial circumstances during the Global Financial Crisis. Excluding these outliers, the ratio is consistently low, reflecting WERN's cautious approach in maintaining a stable dividend payout without overly straining its earnings.

Dividends Well Covered by Earnings?

Dividends being well covered by the earnings ensures that the company is generating sufficient profit to not only pay dividends but also reinvest in business operations, pay down debt, and improve financial stability.

Werner Enterprises (WERN) has shown varying trends of dividend coverage by earnings over the years. Notably, in 2021, EPS of $3.8416 comfortably covered the dividend of $0.46 per share (coverage ratio: 8.35), signifying strong performance. However, in 2008 the ratio (2.44) suggest aggressive dividend payments risking capital reallocation. Nevertheless, recent trends indicate a healthy coverage, which is a safe and sustainable trend for shareholders.

Dividends Well Covered by Cash Flow?

The criterion evaluates whether the company's dividends are well-covered by its free cash flow. This illustrates the company's capacity to sustain dividend payouts through its operational cash generation rather than relying on other financing methods, ensuring a stable and reliable income stream for shareholders.

The trend from 2003 to 2023 shows significant volatility in the free cash flow coverage of dividends for Werner Enterprises (WERN). There are multiple years where dividends are not well-covered by free cash flow, particularly noticeable from 2004 to 2006, 2011 to 2015, and 2017 to 2023 where the dividend coverage ratio is negative. Negative values indicate that the free cash flow is insufficient to cover the dividends, hinting at potential reliance on borrowing or other financing to pay dividends in these years. Years like 2008, 2009, and 2010 show exceptionally high coverage due to significantly higher free cash flow that far exceeded dividend payouts, which is a positive sign. However, the overall inconsistency and the recent trend from 2017 to 2023 showing negative values might be concerning for dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends, without a drop greater than 20%, provide a reliable income stream for investors, crucial for financial planning.

Upon examining Werner Enterprises' (WERN) dividend per share over the past 20 years, it is evident that the company has experienced significant fluctuations. Notably, in 2008 the dividend per share surged to $2.3 from $0.19 in 2007, followed by a drop to $1.45 in 2009. Although this was a substantial decrease, the subsequent dividend halves of $0.7 in 2011, then bouncing to higher amounts, suggests periods of high volatility. The sharp decline from $4.02 in 2019 to $0.45 in 2020 is remarkable, followed by only slight increases thereafter. With such a high degree of variance, more than 20% drops are apparent, indicating that Werner Enterprises has not maintained dividend stability, which could be a red flag for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years show the company's stability, reliable earnings, and shareholder commitment. It often implies a mature and financially healthy firm.

Werner Enterprises has paid dividends consistently over the past 25 years, as indicated by the year-on-year dividend payouts from 1998 to 2023. While there are observable fluctuations in the dividend amounts, the long-term consistency is a positive sign of the company's financial stability and its commitment to returning value to shareholders. Such a trend is typically seen as good, as it reflects Werner Enterprises' ability to generate consistent profits and maintain stability over an extended period.

Reliable Stock Repurchases Over the Past 20 Years?

reliable stock repurchases

Analyzing Werner Enterprises (WERN)'s historical data, it is evident that the company has engaged in consistent stock repurchases over the past 20 years. The unity in the number of shares consistently declining from 81668000 in 2003 to 63444681 in 2023, culminating in a reduction of close to -1.2362 million shares on average per year, signifies a maintainable share buyback program. Such consistency indicates a shareholder-friendly approach by the company, reflecting a policy focused on increasing shareholder value over the long term. This trend is particularly favorable as it suggests robust financial health and management's confidence in the firm's intrinsic value. Further, maintaining fewer shares outstanding aids in amplifying earnings per share (EPS), and subsequently, dividends per share (DPS).