Last update on 2024-06-27

Dentsply Sirona (XRAY) - Dividend Analysis (Final Score: 7/8)

In-depth analysis of Dentsply Sirona (XRAY)'s dividend policy, using an 8-criteria system. Learn about its performance, stability, and investment potential.

Short Analysis - Dividend Score: 7

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

Dentsply Sirona (XRAY) underwent a thorough analysis using an 8-criteria system to evaluate its dividend policy's performance and stability. The analysis scored a 7 out of 8, indicating a generally strong dividend policy for the firm. XRAY boasts a higher-than-industry-average dividend yield of 1.5735%, showcasing a strong return for investors in its sector. Although the dividend growth rate has fluctuated over the last 20 years, maintaining a diverse annual performance with ups and downs, the average annual payout has remained significantly below the 65% threshold, with some inconsistencies. Dividends are reasonably covered by earnings and free cash flow, reflecting positively on the company's financial health. Notably, Dentsply has consistently paid dividends for over 25 years, steadily increasing the payout amount, thereby demonstrating a long-term commitment to returning value to shareholders. Moreover, efforts in stock repurchases underscore the company's aim to sustain shareholder value even through economic downturns.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Dentsply Sirona (XRAY) appears to be a solid investment option for income-focused investors. The company's strong dividend yield, conservative payout ratio, and lengthy history of consistent dividend payments provide a reassuring outlook for those seeking stability and reliability. While some fluctuations and occasional challenges with payout ratios and free cash flow coverages were noted, the overall trends indicate a robust dividend policy and financial health. Therefore, XRAY is worth considering for investors looking for a steady income stream and long-term value.

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?

Why Dividend Yield is higher than the industry average and why it is important to consider

Dentsply Sirona (XRAY) has a dividend yield of 1.5735% which is significantly higher than its industry's average of 0.67%. This represents a strong dividend return for investors considering the sector. Over the last 20 years, XRAY's dividend yield has increased from 0.4383% in 2003 to the current level, indicating a consistent growth. The stock price fluctuated but generally rose from $22.585 in 2003 to $35.59 in 2023, supporting strong dividend growth. This trend indicates a robust dividend policy making XRAY an attractive option for income-seeking investors.

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

The Dividend Growth Rate considers how much dividends have increased over a given period, typically annually, and is expressed as a percentage. It's important as it demonstrates the company's ability to expand its dividend payouts, signaling strong business health.

Evaluating the dividend growth rate over the past 20 years for Dentsply Sirona (XRAY) is insightful. From the provided data: 2003: 7.61%, 2004: 10.61%, 2005: 14.16%, progressing intermittently to 2023: 12%. Despite fluctuations, calculating the Compound Annual Growth Rate (CAGR) or using the average doesn't straightforwardly confirm a consistent rate above 5%. Evaluating historical trends suggests mixed results with a general volatility in dividend payouts, characterized by a sporadic increase, signaling periods of growth but not uniformly or reliably above 5% consistently. This volatility may reflect internal or market fluctuations and operational challenges. So the trend isn't convincingly beneficial under a uniform dividend-growth focus. It's mixed at best.

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

The average payout ratio measures the proportion of earnings a firm pays to shareholders in the form of dividends. A lower payout ratio is important as it indicates that the company is retaining a good portion of its earnings to reinvest in the business or serve as a buffer during downturns.

Dentsply Sirona's annual payout ratios from 2003 to 2023 exhibit significant volatility, ranging from as low as 7.0947% to as high as -120.12%. An average payout ratio of approximately 47.45% over 20 years suggests that, generally, the company has maintained a prudent approach to dividend payments, well below the 65% threshold. However, negative ratios in certain years highlight periods of significant operational challenges, reflected in negative earnings. Consequently, while the overall trend of a payout ratio below 65% is favorable, the fluctuations and negative figures indicate underlying inconsistencies in the payout stability.

Dividends Well Covered by Earnings?

Explain the criterion for Dentsply Sirona (XRAY) and why it is important to consider

Criterion 2: Dividends are well covered by the earnings.

Dividends Well Covered by Cash Flow?

An important criterion for evaluating a company's dividend sustainability is the extent to which dividends are covered by free cash flow. Free cash flow is the cash a company generates after accounting for cash outflows to support operations and maintain capital assets. A higher ratio of free cash flow to dividends indicates a safer dividend, as it shows the company has ample cash reserves to cover its dividend payments.

By examining Dentsply Sirona's free cash flow relative to its dividend payouts over the past 20 years, it is evident that the company's dividend coverage has generally improved. For instance, in 2003, the company's free cash flow was approximately $179 million, compared to dividend payouts of around $15 million, resulting in a coverage ratio of roughly 0.08. By 2023, free cash flow declined slightly to $228 million, yet the dividend payout increased to $116 million, resulting in a much higher coverage ratio of about 0.51. Importantly, a ratio exceeding 1 would indicate that dividends are fully covered by free cash flow, which Dentsply Sirona has approached but not consistently achieved over this period. However, we've seen substantial improvement, especially in recent years—raising from 0.10 in 2017 to over 0.50 in 2023. This trend is positive as it shows increasing buffered capacity in maintaining and potentially growing dividend payouts, even amidst varying levels of free cash flow. Despite slight decreases in free cash flow in some years, the overall trend in improving dividend coverage is a strong indicator of robust financial health.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Dentsply Sirona (XRAY) and why it is important to consider

For income-seeking investors, investing in companies that provide stable dividends over an extended period is crucial. Stability, characterized by dividend payments not dropping more than 20% in a given year, offers a sense of security and predictability, making financial planning easier and reducing the chance of income disruption.

Dividends Paid for Over 25 Years?

Dividends paid consistently over a long period demonstrate a company's stability and commitment to returning value to shareholders.

Dentsply Sirona has indeed paid dividends consistently for over 25 years. The steady increase in dividend per share, starting from $0.0703 in 1998 to $0.56 in 2023, reflects a robust and reliable dividends policy. This long-term trend is positively viewed by shareholders as it indicates the company's solid financial health and a continued focus on shareholder returns. Importantly, even during economic downturns, the company avoided cutting dividends, demonstrating resilience and prudent financial management. Overall, this trend is excellent and adds to investor confidence in long-term shareholder value.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Dentsply Sirona (XRAY) and why it is important to consider

Reliable stock repurchases indicate a company's commitment to returning value to shareholders and maintaining shareholder equity. It serves as a signal of a company's confidence in its own future cash flows and profitability. This criterion is important for investors looking for consistent and predictable returns.