Last update on 2024-06-27

Wustenrot & Wurttembergische (WUW.DE) - Dividend Analysis (Final Score: 5/8)

Assess the stability and performance of Wustenrot & Wurttembergische (WUW.DE) dividends with an 8-criteria scoring system, revealing a final score of 5/8.

Short Analysis - Dividend Score: 5

We're running Wustenrot & Wurttembergische (WUW.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Wustenrot & Wurttembergische (WUW.DE) has a dividend yield of 4.8726%, significantly higher than the industry average of 1.73%. The average annual dividend growth rate is 6.05%, exceeding the benchmark of 5%. The payout ratio averages 23.87%, well below the 65% threshold, indicating a conservative and sustainable dividend policy. However, the dividend per share is inconsistently covered by earnings and free cash flow, raising concerns. Nevertheless, the company has maintained stable dividends over the years with no drops greater than 20%, although it has not consistently paid dividends for over 25 years. Additionally, WUW.DE has shown low and inconsistent stock repurchase activities.

Insights for Value Investors Seeking Stable Income

Wustenrot & Wurttembergische (WUW.DE) has some positive aspects such as a high dividend yield, strong growth rate, and sustainable payout ratios, making it attractive for income investors. However, the inconsistent coverage by earnings and cash flow, gaps in dividend payments, and low stock repurchase activity suggest potential risks. Investors should be cautious and may want to consider these factors before deciding to invest. It might be worth looking into for those who can handle some volatility and are looking for higher yields.

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?

What does dividend yield mean and why is it important?

Wustenrot & Wurttembergische (WUW.DE) exhibits a dividend yield of 4.8726%, which is surgically higher than the industry average of 1.73%. Over the last 20 years, the company's dividend yield has experienced significant fluctuations but generally remains above the industry average. Notably, in 2018 and 2020, it exhibited peaks of 8.125% and 7.8692%, respectively. This high dividend yield suggests that WUW.DE returns a larger portion of its profits to shareholders compared to the industry norm, which could be appealing to income-focused investors. However, sitting at such a persistently high yield can also raise red flags about possible declining stock prices or financial instability. The company's stock price has, indeed, decreased from €19.95 in 2015 to €13.34 in 2023. Moreover, the relatively stable dividend per share of around €0.65 in recent years adds another layer of stability, but it does raise some questions about the long-term sustainability of these high yields given the fluctuating stock prices and the payout ratio dynamics.

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

The Dividend Growth Rate measures how the dividend payment has increased over a given period. A rate higher than 5% is considered solid growth.

Over the last 20 years, Wustenrot & Wurttembergische (WUW.DE) has shown an average dividend growth rate of approximately 6.05%, which signals a healthy growth pace above the 5% benchmark. Despite some years with negative growth rates, such as 2007 and 2015, the company has managed to sustain an overall upward trend. This is favorable as higher dividends indicate good profitability and strong potential for long-term investment returns.

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

Dividend payout ratio is the proportion of earnings paid out as dividends to shareholders. The lower the ratio, generally the more sustainable the dividend.

Wustenrot & Wurttembergische (WUW.DE) has an average payout ratio of approximately 23.87% over the last 20 years, which is substantially lower than the 65% threshold. This indicates that the company has maintained a conservative and sustainable dividend policy. With most years showing payout ratios well below even 30%, and only one significant spike in 2008 where the payout ratio hit over 100%, the overall trend shows a disciplined approach to dividend distribution. Investors can be reassured by this trend as it generally indicates stability in potential dividend income.

Dividends Well Covered by Earnings?

Dividends need to be well covered by earnings to ensure the sustainability of payouts without compromising financial stability.

Examining the relationship between earnings per share (EPS) and dividends per share (DPS) for Wustenrot & Wurttembergische (WUW.DE) from 2003 to 2023, the coverage ratio shows significant variability. The coverage ratio, calculated as EPS divided by DPS, highlights the ability of a company to pay dividends from its net income. Ideally, this ratio should be greater than 1 to indicate robust coverage. In several years, such as 2009 (0.2085), 2013 (0.3213), and 2015 (0.1734), the dividend per share exceeds earnings per share, signifying inadequate coverage and potential financial strain. Contrastingly, some years like 2014 (0.3476), 2020 (0.5804), and 2019 (0.2454) show better but still insufficient coverage. Overall, the trend points to inconsistent dividend coverage, suggesting that the company's earnings volatility impacts its ability to sustainably cover dividends. This could be worrisome for dividend-focused investors seeking stable income.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means that the company's free cash flow is sufficient to cover dividend payments, which is essential for the sustainability of dividends in the long term.

Examining Wüstenrot & Württembergische (WUW.DE), the free cash flow and dividend payout amounts over the years reveal a highly variable pattern. Most notably, the free cash flow has been extremely volatile, oscillating between large positive and negative figures. For example, in 2005, the free cash flow stood at €125.52 million, which dropped significantly in 2006 to a negative €2.04 billion. The dividend payout, on the other hand, was relatively stable from 2010 onwards, averaging around €56-60 million annually. When looking at the ratio of dividend covered by cash flow (Free Cash Flow/Dividend Payout Amount), the situation is quite concerning. The calculated values are inconsistent and often negative, such as -0.37375 in 2011 and -0.06669 in 2021. These negative values undermine the financial health and sustainability of dividends. The highest ratio was 0.3121 in 2017, indicating that in some years, the company managed to cover dividends well from its cash flow. However, the inconsistency and negative values in multiple years suggest a substantial risk. Overall, the trend is problematic for dividend investors placing importance on safety and reliability. The high volatility in free cash flow combined with negative cover ratios indicate that Wüstenrot & Württembergische's (WUW.DE) dividends are not consistently covered by cash flow, raising red flags about the reliability of future dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends are a key measure for assessing the reliability of income from investments; even minimal drops can compromise investor confidence.

Over the last 20 years, Wustenrot & Wurttembergische's dividend history has exhibited some fluctuations but without any instances of a more-than-20% drop. Particularly notable are the significant increases in 2014 and 2018, with dividends peaking at 1.3 EUR per share. Despite some zero dividend years, the company has largely succeeded in rewarding its shareholders regularly. This stability is a positive attribute and should give confidence to income investors.

Dividends Paid for Over 25 Years?

Examining if Wustenrot & Wurttembergische (WUW.DE) has consistently paid dividends for over 25 years is vital. It demonstrates the company's ability to generate return for its shareholders progressively.

Analyzing the data provided, it is apparent that Wustenrot & Wurttembergische (WUW.DE) does not meet the criterion of paying dividends consistently over the past 25 years. There are several years, specifically 2002, 2003, and 2007, where no dividends were paid. Consistency in dividend payments is a good indicator of a company’s financial health and shareholder value commitment. Gaps in dividend payments might be signaling potential financial or operational issues during those periods. Therefore, the trend for this criterion is negative for WUW.DE. Despite those gaps, the company has shown an ability to pay dividends at a relatively steady rate in the subsequent years, although the inconsistency factor cannot be ignored.

Reliable Stock Repurchases Over the Past 20 Years?

Examining stock repurchases over the past 20 years is crucial as it indicates a company’s confidence in its financial health and growth potential. Frequent or consistent buybacks can suggest strong cash flows and a commitment to returning value to shareholders.

Wustenrot & Württembergische (WUW.DE) appears to have relatively low activity in repurchasing shares over the last 20 years. The number of shares has mostly remained constant with notable buybacks in 2009,2016, and 2022, yet these repurchases are sporadic and do not imply a consistent trend. On average, the company shows a repurchase rate of approximately 0.3199 in each of the last 20 years which indicates a low emphasis on share buybacks. Generally, this trend might suggest that the company may prefer other ways of utilizing excess cash such as paying down debt, investing in growth opportunities, or distributing dividends. Depending on the potential investor's preference for stock buybacks, this could be perceived as less advantageous compared to companies with more aggressive repurchase programs. Overall, this trend is neutral to slightly negative focusing on share buybacks policy.