Last update on 2024-06-27

Williams Companies (WMB) - Dividend Analysis (Final Score: 5/8)

Explore the performance and stability of Williams Companies (WMB) with our in-depth dividend analysis, evaluating using an 8-criteria scoring system for sustained shareholder returns.

Short Analysis - Dividend Score: 5

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

Based on an 8-criteria scoring system, Williams Companies (WMB) achieved a score of 5 for its dividend policy. Here’s a breakdown: 1. **Dividend Yield**: WMB's current 5.145% yield is slightly below the industry average of 5.53%. Historical volatility seen in yields with a peak of 9.5331% in 2015. 2. **Dividend Growth Rate**: Over 20 years, WMB’s average dividend growth exceeds 5%, despite experiencing significant fluctuations. 3. **Payout Ratio**: The average payout ratio over 20 years is 23.632%, well below the 65% threshold, demonstrating sustainability, though with some annual spikes. 4. **EPS Coverage**: Variable EPS vs. DPS with years showing both strong and poor coverage. Caution is needed due to earnings volatility. 5. **Cash Flow Coverage**: Mixed results, with recent improvements, but historical volatility in free cash flow coverage is a concern. 6. **Stable Dividends**: Generally consistent upwards dividend trend since 2003, stable performance post-2017. 7. **Dividends Paid 25+ Years**: Consistent payments since 1998, with only minor declines in early 2000s & slight fluctuations 2016-17. 8. **Stock Buybacks**: Limited reliable repurchase activity over the past 20 years, with certain years showing notable repurchase volumes.

Insights for Value Investors Seeking Stable Income

Considering the 8 criteria, while Williams Companies (WMB) has shown resilience and growth in certain areas like dividend stability and payment history, factors such as the historical volatility in earnings, cash flow, and dividend yield warrant cautious optimism. Potential investors should further investigate financial health and market conditions. It's advisable to keep an eye on overall market trends and additional financial metrics for a comprehensive decision. Thus, WMB is worth considering but requires careful and continuous monitoring.

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 crucial as it indicates the ratio of a company's annual dividend compared to its share price, reflecting the income return on investment shareholders can expect.

Williams Companies (WMB) has a current dividend yield of 5.145%, slightly below the industry average of 5.53%. Historically, WMB's dividend yield has shown considerable volatility, with peaks and troughs over the last two decades. Notably, in 2015, the dividend yield soared to 9.5331%, correlating with a decrease in stock price to $25.7 from $44.94 in 2014. Conversely, the yield was lowest in 2003 at 0.4072% when the stock price was $8.0053. This trend suggests that although WMB's dividend yield is somewhat below the industry average at present, it has demonstrated the company's capacity to generate attractive yields in various market conditions. However, the yield's decline from 7.98% in 2020 to 5.145% in 2023 may raise concerns among investors seeking stable or growing income returns. Hence, while the yield remains competitive, the trend indicates potential volatility and might necessitate further analysis of other financial metrics.

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

The Dividend Growth Rate criterion assesses whether the annual dividend has increased by at least 5% each year over the last 20 years. This is a key indicator of a company's capacity to generate increasing cash flows and reward shareholders consistently.

The provided Dividend Ratio for Williams Companies (WMB) shows significant fluctuations, with values ranging from as low as -93.546 in 2003 to as high as 212.5441 in 2005. The positive range in most years reflects periods of strong dividend growth, particularly in 2004 (100) and 2005 (212.5441). However, there were notable declines in specific years, such as 2003 (-93.546) and 2016 (-31.4286) and 2017 (-28.5714), suggesting volatility. The Average Dividend Ratio stands at 24.0686, which indicates that, on average, WMB's dividend has grown above the 5% threshold over the 20-year period. Despite some negative years, the overall trend averaging over 20 years is above 5%, which is a positive sign. This trend could be considered good as it shows resilience and capacity for growth across different market conditions.

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

Consider whether the average payout ratio over the last 20 years is lower than 65%. A ratio below this benchmark suggests that the company is not overextending itself in paying dividends, which is generally considered sustainable.

The average payout ratio over the last 20 years for Williams Companies (WMB) is 23.632%. This is well below the 65% benchmark, indicating a conservative and sustainable dividend policy over the long term. However, it is crucial to note significant fluctuations in individual years. For instance, in 2009, the payout ratio was 74.1687%, and in 2020, a massive 920.069%. These spikes raise questions about periodic financial instability or significant one-off capital costs. Despite these anomalies, maintaining an average well below the 65% threshold is commendable, indicating a generally disciplined fiscal approach. Therefore, this trend is good overall, demonstrating that the company typically issues dividends without compromising its financial health.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that a company's earnings are sufficient to pay out its dividends. This metric is crucial because it indicates financial health and sustainability of dividend payments.

To assess whether Williams Companies (WMB) has its dividends well covered by earnings, let's examine the Earning per Share (EPS) and Dividend per Share (DPS) from 2003 to 2023. Over these years, there have been significant fluctuations. The general rule of thumb is that an EPS greater than DPS indicates well-covered dividends. From the data: - We see negative EPS years (2003, 2009, 2016) indicating potential difficulty in maintaining dividends during those periods. - Positive years with high EPS such as 2007, 2014, and 2017 display strong coverage (even having ratios like 2.296 in 2014 and 1.313 in 2022). - There are years with EPS significantly below the DPS, such as 2016, where the EPS was -0.5648 while the DPS was 1.68, showing poor coverage (a worrisome trend). In summary, the trend in EPS vs. DPS at Williams Companies has shown variability. Some years show strong coverage, but sporadically poor coverage, particularly in negative EPS years. Therefore, while there are positive signals, the variability suggests a need for cautious monitoring of WMB's sustainability in dividend payments.

Dividends Well Covered by Cash Flow?

The criterion 'Dividends Well Covered by Cash Flow' indicates the company's ability to support its dividend payments from its free cash flow. This is crucial because relying solely on profit margins can paint an incomplete picture, as profits are often subject to accounting adjustments. Consistently covering dividends with free cash flow underscores the company's financial stability and efficient cash management.

Between 2003 and 2023, Williams Companies (WMB) has exhibited considerable volatility in free cash flow (FCF). For instance, FCF was negative in 10 different years, with 2006 (-$619.6 million) and 2013 (-$1.355 billion) bearing the most alarming figures. Conversely, in recent years, WMB shows an improvement, culminating in $3.371 billion in 2023. Examining the ratio 'Dividend covered by Cashflow,' the picture is mixed. A positive ratio indicates dividends are well covered, which is evident notably in 2017 (8.55x) and 2018 (46.2x), possibly indicating extraordinary gains or one-off events. Nevertheless, sustainable and improving trends, especially the ratio of 0.64x in 2023, depict a good turn. However, the fact that the ratio fluctuated widely in preceding years shouldn’t be ignored. While the current trend is favorable, historical volatility is a concern.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends mean consistent income, shows company financial health & sustainability.

The Williams Companies (WMB) displays a generally consistent positive trend in its dividends per share over the past two decades, with no significant drops of 20% in any given year. From 2003’s $0.0326/share to 2023's $1.792/share, the values generally move upward. Though there were minor drops (such as from 2015's $2.45 to 2016’s $1.68 and then $1.2 in 2017), the declines were well within the 20% threshold before rebounding. This trend showcases a stable financial strategy aimed at reinforcing shareholder value and provides confidence in the company's financial robustness. For income-seeking investors, this level of stability is essential for risk mitigation and predictable returns.

Dividends Paid for Over 25 Years?

Examining if a company has paid dividends consistently for over 25 years is crucial in assessing its capacity for sustained profitability and commitment to returning value to shareholders.

Williams Companies (WMB) has consistently paid dividends for over 25 years, from 1998 to 2023, showcasing a consistent trend in rewarding shareholders. However, between 2002 and 2005, there is a noticeable decline, especially in 2003 with a significantly low dividend per share of $0.0326, down from $0.5443 in 2001. Such a dip may indicate financial stress or a strategic shift during that period. Post-2005, dividends show a consistent upward trend, with slight fluctuations in the years 2016-2017. The recent years (2018-2023) reflect stability with gradual increment, peaking at $1.792 in 2023. This trend is positive for income-focused investors, indicating WMB's commitment to returning value over two decades.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Williams Companies (WMB) and why it is important to consider

Number of Share last 20 years: {'year': {'values': ['2003', '2004', '2005', '2006', '2007', '2008', '2009', '2010', '2011', '2012', '2013', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']}, 'numberOfShares': {'values': [516534653, 528064516, 605847000, 608627000, 609866000, 592719000, 589385000, 585000000, 598175000, 681000000, 687185000, 747000000, 749271000, 750673000, 828518000, 1210564000, 1212037000, 1213631000, 1215221000, 1218362000, 1217784000]}} Reliable repurchased years last 20 years: ['2008', '2009', '2010', '2023'] Average repurchased last 20 years: 4.8393