Last update on 2024-06-28

Xylem (XYL) - Dividend Analysis (Final Score: 5/8)

Xylem (XYL) - Comprehensive analysis of dividend performance with a final score of 5/8 based on an 8-criteria system. Insight into dividend policies and financial stability.

Short Analysis - Dividend Score: 5

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

Xylem's (XYL) overall dividend score is 5 out of 8, based on various analysis criteria. The company's dividend policy shows a mixed performance. Xylem began paying dividends in 2011, with inconsistent annual yields that are generally below the industry average. Though the average annual dividend growth surpasses 5%, its volatility suggests some instability. Positively, Xylem maintains an average payout ratio well below 65%, demonstrating the company's ability to sustain dividend payments through its earnings. The dividends seem well-covered by the company's earnings, indicating reliability. However, there is some ambiguity regarding the accuracy of a reported 20% drop in DPS at one point. Xylem fails to meet the criterion of paying dividends for over 25 years and lacks a track record of reliable stock repurchases over the past 20 years. Nonetheless, their recent trends in DPS imply financial health and promising shareholder returns.

Insights for Value Investors Seeking Stable Income

Considering Xylem's strengths, such as maintaining a payout ratio below 65% and covering dividends with earnings, the stock may be promising for investors seeking moderate growth and stability. However, its average dividend yield below the industry standard and volatility in dividend growth indicate some risks. Long-term investors looking for a consistent 25-year dividend history might want to look elsewhere, but those okay with a shorter yet stable dividend-paying history could find Xylem compelling.

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

From 2008 to 2011, Xylem did not pay dividends. The initiation of dividends began in 2011 with a yield of 0.3931%. The dividend yield saw a notable peak in 2012 at 1.4908%, consistent with fluctuating yield percentages over the years. In recent years, the yield has hovered around 1%. In 2023, the yield stands at 1.1542% which is lower than the industry average of 1.57%. Xylem's rising stock price from $25.69 in 2011 to $114.36 in 2023 complicates a direct comparison with industry averages. Historically, the firm's yield has often been below or around the industry average, which can be considered suboptimal if dividends are a primary investment criterion.

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

Explain significance of the Dividend Growth Rate criterion for investors analyzing dividend sustainability and potential long-term returns.

Examining the given dividend per share (DPS) growth rates for Xylem (XYL) from the year 2008 to 2023, we see considerable fluctuations. At certain points over the interval, the dividend growth rate leaps significantly beyond 5% (e.g., in 2012 with a dramatic jump), only to fall below 5% or exhibit negative growth in subsequent years. The average dividend ratio provided (26.595725%) is somewhat misleading due to sharp peaks and troughs. Although the average is well above the 5% threshold, volatility suggests a potentially unstable dividend trajectory.

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

Average Payout Ratio lower than 65% helps to ensure that the company is generating sufficient earnings to cover its dividends, which indicates financial stability.

Xylem's average payout ratio over the past 20 years is 31.87815%. This is significantly below the 65% threshold, which points to the company's ability to comfortably cover its dividend payments out of its earnings. Despite a spike to 73.7484% in 2020, the overall trend shows financial prudence and sustainability in Xylem's dividend policy. This trend is good as it indicates financial health and sustainable income for investors.

Dividends Well Covered by Earnings?

Dividends being well covered by the earnings is crucial as it assures investors that the company generates enough profit to maintain or increase dividends.

Xylem's (XYL) dividends are adequately covered by its earnings over the years from 2008 to 2023. The coverage ratio shows variability, peaking in 2020 at approximately 0.737, indicating good coverage. Generally, a ratio above 0.5 is considered favorable. Hence, despite some fluctuations, Xylem shows a consistent ability to cover dividends with earnings. This trend is positive for investors seeking reliability in dividend payments.

Dividends Well Covered by Cash Flow?

Explain the criterion for Xylem (XYL) and why it is important to consider

Dividends should be well covered by free cash flow to ensure that the company can sustain its dividend payouts without jeopardizing its overall financial health. High coverage ratios imply that the company is generating enough cash to comfortably pay its dividends. Low coverage ratios, on the other hand, might signal potential risks in dividend sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividends ensures a reliable source of income for investors, especially those reliant on steady cash flows from their investments. A drop over 20% often indicates potential financial instability or adverse market conditions affecting the company's profitability.

Xylem (XYL) commenced regular dividend payments from 2011, displaying a consistent increase in dividends per share (DPS) over the last 12 years. Starting from $0.101 in 2011 to an estimated $1.32 in 2023. Such a rising trend in DPS indicates strong financial health and shareholder value.However, the alert indicates a year where DPS dropped by 20%. This information's accuracy needs clarity since no data hints towards a 20% drop based on given figures, alluding a computing-error. Thus, reinforcing Xylem's reliability for income-seeking investors.

Dividends Paid for Over 25 Years?

Discusses whether a company has paid consistent dividends for over 25 years and its importance for long-term income investors.

From the year 2008 to 2023, Xylem's dividends per share have progressively increased from $0 in the first few years to $1.32 in 2023. This shows a trend of growing dividends, demonstrating the company's increasing ability to share profits with shareholders. However, it falls short of providing a history of 25 years of dividend payments, as the consistent payments start only from 2011. This trend is positive in terms of dividend growth but does not meet the 25-year criterion, which may concern investors looking for ultra-long-term dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Xylem (XYL) and why it is important to consider

The criterion is to assess the consistency and reliability of stock repurchases by Xylem over the past 20 years. Reliable stock repurchases typically indicate the company’s commitment to returning capital to shareholders and suggest a level of confidence in the company’s financial health. Regular repurchases can support the stock price and provide additional shareholder value.