Last update on 2024-06-27

WestRock (WRK) - Dividend Analysis (Final Score: 3/8)

Analyze WestRock (WRK) dividend performance & stability. Final Score: 3/8 based on 8-criteria scoring system.

Short Analysis - Dividend Score: 3

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

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 annual dividend income an investor receives per dollar invested in a stock. A higher yield usually signals higher income potential for investors.

WestRock's (WRK) dividend yield for 2023 stands at 2.7168%, slightly above the industry average of 2.77%. However, analyzing the last 10 years reveals significant fluctuations. Between 2015-2019, the dividend yield was notably higher, peaking at 4.6213% in 2018, but later declined sharply. Compared to the more consistent industry averages ranging 2%-2.77%, this suggests relative instability in WestRock's dividend payouts. Given the recent uptrend of WRK's yield closer to the industry average, the trend is somewhat promising but still highlights a lack of consistency needed for attracting risk-averse income-seeking investors.

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

Dividend Growth Rate over 5% is essential as it indicates a company’s increasing ability to return profits to shareholders. This growth often reflects strong financial health and profitability.

Analyzing the Dividend Ratio for WestRock (WRK), the data reveals a fluctuating trend. A notable beginning with zero dividends, a stark peak in 2016, followed by negative dips. The values infer instability in dividend payments, citing especially the dramatic decrease in 2020. The average Dividend Ratio being 4.99% barely passes the 5% mark. Positively, WestRock indicated some regain in 2021 and 2022, but overall inconsistent growth may signal potential risk for continuous investor confidence. Hence, while the growth rate requirement is technically met, the volatility could be concerning for long-term stability.

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

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

The average payout ratio for WestRock (WRK) over the last 20 years stands at 3.667%, which is well below the 65% threshold. However, this figure is skewed by several years reporting a 0% payout ratio or a negative ratio, which indicates likely struggling financial health or reinvestment strategies in specific years. The positive streaks, particularly 2015, 2018, and 2019, show that WRK has made efforts to maintain sustainable dividends when financially feasible. Overall, the trend is good, demonstrating fiscal prudence, but the frequent negative or zero values warrant closer scrutiny.

Dividends Well Covered by Earnings?

This criterion evaluates if the company's earnings sufficiently cover its dividend payments. It's key for ensuring sustainability, as a company that can't cover dividends with earnings might face financial strain if it has to dip into reserves or take on debt to meet payouts.

The data from WestRock (WRK) show fluctuating patterns in earnings per share (EPS) and dividends per share (DPS). From 2015 onwards, we can see that dividends were not consistently covered by earnings, which is concerning. Positive ratios are noted, but negative coverages in years like 2016 and 2020 meaning earnings fell short to cover dividends. For instance, in 2016, with an EPS of -1.5366 and a DPS of 1.4507, it illustrates earnings do not cover the pay-out, posing sustainability issues. Thus, although there are instances of positive coverage, the trend indicates volatility and potential unsustainability. This trend is not ideal as it highlights periods where the company faced financial discrepancies.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow indicate that the company generates sufficient cash flow to support its dividend payouts. This is crucial for the sustainability of dividend payments.

Over the years from 2003 to 2023, WestRock's coverage ratio of free cash flow to dividend payout exhibits substantial volatility. Particularly noteworthy are the years 2003, 2005, 2006, 2013, 2014, 2015, and recent years like 2021 and 2022 where the ratio is notably below 1.0. This indicates that in these years, WestRock's free cash flow was insufficient to cover its dividend payouts fully, suggesting reliance on external funding or cash reserves. On the positive side, the coverage shows an improving trend in certain periods like 2009, 2016, and significantly better in 2018 where free cash flow exceeded the dividend payouts substantially (coverage ratio 0.497 in 2019, highest in the dataset). Overall, the long-term trend hints at periods of both strength and weakness, and the 2023 figure (0.410) is promising relative to the average coverage ratio. This mixed trend draws attention to the importance of continuous monitoring.

Stable Dividends Since the Company Began Paying Dividends?

explain the criterion for WestRock (WRK) and why it is important to consider

Stable dividend payments over long periods indicate that a company has consistent earnings and robust financial health, which is crucial for income-seeking investors who depend on these payouts.

Dividends Paid for Over 25 Years?

Explain the criterion for WestRock (WRK) and why it is important to consider

The criterion 'Dividends Paid for Over 25 Years' assesses whether a company has a long-standing history of dividend payments, which is indicative of financial stability and shareholder value. A steady or growing dividend over a long period can attract income-focused investors, providing confidence that the company manages its finances well enough to return profits to shareholders consistently.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for WestRock (WRK) and why it is important to consider

Reliable stock repurchases over an extended period indicate a company's commitment to returning value to shareholders. It is also a signal of the company's confidence in its financial health and future prospects.