Last update on 2024-06-27

Whirlpool (WHR) - Dividend Analysis (Final Score: 7/8)

Evaluate Whirlpool (WHR)'s dividend performance with our comprehensive 8-criteria scoring. Final score: 7/8, reflecting stability and high returns. Read for details!

Short Analysis - Dividend Score: 7

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

The dividend analysis for Whirlpool (WHR) used eight criteria to evaluate the company's dividend policy, scoring 7 out of 8. Whirlpool's dividend yield exceeds the industry average, making it potentially attractive for income-focused investors. The company has shown a stable increase in dividends over 20 years, from $1.36 per share in 2003 to $7 per share in 2023. The average annual dividend growth rate is 8.50%, but inconsistencies exist with periods of no dividend payout. Whirlpool maintains a low payout ratio (22.93%) and has a mixed history with dividends being covered by earnings and cash flow. While the dividend history is mostly positive with a few concerning years, Whirlpool has consistently paid dividends for over 25 years and has a record of reliable stock repurchases in 12 out of the past 20 years.

Insights for Value Investors Seeking Stable Income

Overall, Whirlpool (WHR) appears to be a stable dividend payer with an attractive yield and a long history of consistent payments. However, the inconsistency in earnings and cash flow coverage could pose a risk. Potential investors might consider looking into this stock if they are seeking a stable dividend income but should be cautious of the financial sustainability during economic downturns. Diversifying investments can also help mitigate risk.

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, calculated as the annual dividends paid per share divided by the share price, essentially measures the income generated by an investment relative to the stock's market value. A higher dividend yield can indicate a potentially attractive investment, especially for income-focused investors, but it is essential to consider the sustainability and growth of those dividends as well.

Whirlpool's current dividend yield of 5.7485% significantly exceeds the industry average of 1.99%. Historically, WHR's dividend yield has shown significant fluctuations, notably spiking in 2008 (4.1596%), 2011 (4.0674%), 2018 (4.2575%), 2022 (4.9484%), and reaching its peak in 2023 (5.7485%). This could be seen positively, suggesting higher returns for shareholders than the average industry yield. However, it's crucial to consider the stock's price performance and dividend sustainability. The stock price tends to decline during these peaks, e.g., the 2023 closing price was $121.77, down from $141.46 in 2022. The stability of dividend payments over 20 years (increased from $1.36/share in 2003 to $7/share in 2023) supports a positive outlook. Nonetheless, potential investors should assess if such yields are sustainable given overall financial health, growth prospects, and broader market conditions.

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

Evaluating whether the Dividend Growth Rate has been consistently above 5% over the last 20 years helps identify whether Whirlpool (WHR) is a stable and growing dividend payer, which is critical for income-focused investors.

The data regarding Whirlpool's dividend growth rate over the past 20 years shows mixed results. The dividend per share ratio has fluctuated significantly, with years showing both increases and zeros. The maximum reported value was 28.44% in 2022, but the overall average dividend ratio stands at 8.50%. While an average of 8.50% suggests a positive growth rate, the inconsistency and presence of years with no dividend payout show volatility. This pattern may be concerning for investors seeking reliable and steadily increasing dividends.

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

The average payout ratio is the percentage of earnings a company pays to its shareholders in the form of dividends. It indicates how sustainably a company can pay and increase dividends. A ratio under 65% is considered healthy.

Whirlpool's average payout ratio over the last 20 years stands at approximately 22.93%, considerably below the 65% threshold. This trend is positive for the company's dividend sustainability. Given that only one year (2018) showed an excessively high payout ratio of over 91%, it's clear that Whirlpool has generally maintained a robust and disciplined approach to dividend payouts. Years of negative payout ratios (e.g., 2016 and 2022) signal either losses or specific accounting strategies but do not significantly distort the long-term average. Therefore, Whirlpool has demonstrated a strong capability to sustain its dividend payments while enabling growth and investment in its operations.

Dividends Well Covered by Earnings?

This criterion assesses if the company’s earnings are sufficient to cover its dividend payments. It's critical because a well-covered dividend indicates financial stability, reducing the risk of dividend cuts. A high ratio means earnings largely cover dividends, signalling robust financial health.

Analyzing Whirlpool's EPS and DPS data from 2003 to 2023, the coverage ratio fluctuates significantly. A negative ratio in 2018 and 2022 reveals Whirlpool's earnings couldn't cover dividends, which is concerning. The highest coverage in 2017 (0.91) suggests an acceptable but not overly secure margin. A significant dip to below zero in 2020 indicates severe payout risk that can alarm investors. Generally, while there are periods of good coverage, the gaps and dips caution towards monitoring future EPS stability. Overall, inconsistent earnings versus dividends can present a challenge for sustainable dividend policy, making this trend somewhat precarious for investors.

Dividends Well Covered by Cash Flow?

This criterion evaluates whether a company's dividends are sustainably covered by its free cash flow, ensuring that payouts are not jeopardizing financial stability.

Analyzing Whirlpool's historical Free Cashflow against its Dividend Payout amounts reveals the percentage of free cash flow used to cover dividends each year. Here are a few notable points: 1. **Negative Coverage (2008, 2011):** Years like 2008 and 2011 show negative values, indicating that the company's dividend payouts were not covered by free cash flow. Specifically, in 2008, the coverage was -0.58, through 2011 was -1.89, suggesting the company might have relied on borrowing or reserves to pay dividends. 2. **High Coverage (2023):** In 2023, the ratio is 1.05, depicting that the dividend payments are fully covered and exceeded by free cash flow. 3. **Moderate to Low Coverage (Other Years):** For most of the other years, coverage ratios ranged between 0.27 (2013) to 0.54 (2017). While moderate, it indicates consistency in maintaining cash flows reasonably proportionate to dividend payments. Based on the data, Whirlpool has had fluctuations in terms of dividend coverage by free cash flow. Although it displayed strong coverage in certain years, ongoing fluctuation suggests a need for vigilant financial management to ensure consistent dividend sustainability. This poses a mixed outlook – generally positive but with periods of financial strain. Overall, this trend is moderate but trending towards improvement, especially looking at 2023.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividends is crucial for income-seeking investors as it ensures a reliable income stream, reflecting a company's consistent financial health and capability to generate surplus profits.

Examining the dividend history of Whirlpool (WHR) over the past 20 years reveals that there has been a steady increase in dividend payments from $1.36 in 2003 to $7.00 in 2023. This consistent upward trend is generally a positive indicator for investors seeking stable and growing income. However, the mention of a year where dividends dropped by 20% is concerning. A significant dip in dividend payments can indicate temporary financial distress or strategic business adjustments. Without specific details about which year experienced this drop, it's hard to provide a complete contextual analysis, yet the overall pattern remains promising. It is essential for long-term stability that such dips are minimal and rare. Therefore, while most years reflect strong performance, monitoring is advisable.

Dividends Paid for Over 25 Years?

Dividends been paid consistently for over 25 years indicates stability and commitment to shareholder returns.

Whirlpool (WHR) has consistently paid dividends for over 25 years, starting at $1.36 per share in 1998 and rising to $7 per share by 2023. This consistent performance suggests strong financial health, a stable earnings base, and a management team committed to returning value to shareholders. Despite economic downturns and market volatility over the years—like the 2008 financial crisis—Whirlpool has maintained and even gradually increased its dividend payouts. This long-term trend is a positive signal for investors seeking reliable income through dividends, underscoring the company's confidence in its ongoing profitability and cash flow generation capabilities.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases and why it is important to consider

Stock repurchases, or buybacks, involve a company purchasing its own shares from the marketplace. This criterion is an essential signal for investors, as it typically indicates that the company believes its stock is undervalued. It showcases management's confidence in the firm’s future performance. From 2003 to 2023, Whirlpool (WHR) exhibited share buybacks in 12 out of 20 years. Notably, steady repurchases are evidenced by a decreasing trend in the number of shares outstanding from 79.9 million in 2007 to 55 million in 2023. This reduces the share count, leading to higher earnings per share (EPS) and often a higher stock price, reflecting proactive capital management.