Last update on 2024-06-27

Secunet Security Networks (YSN.DE) - Dividend Analysis (Final Score: 6/8)

Comprehensive analysis of Secunet Security Networks' (YSN.DE) dividend performance using an 8-criteria scoring system. Final score: 6/8.

Short Analysis - Dividend Score: 6

We're running Secunet Security Networks (YSN.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis uses an 8-criteria scoring system to evaluate the performance of Secunet Security Networks' (YSN.DE) dividend policy, resulting in a score of 6. The dividend yield of 1.9589% is higher than the industry average, which indicates good returns for shareholders. The payout ratio averaging 17.2% over the last 20 years shows that the company has managed dividends responsibly while keeping funds for growth. Secunet has generally shown an upward trend in dividends since 2014, even though there was a notable drop in 2020, likely due to the pandemic. The company doesn't meet the 25-year dividend paying criterion and lacks a reliable stock repurchase program, which might concern some investors. Despite these points, the company demonstrates strong financial health and potential for continued dividend sustainability.

Insights for Value Investors Seeking Stable Income

Secunet Security Networks presents an attractive proposition for dividend-seeking investors, with strong dividend yields and responsible payout ratios. However, the inconsistent stock repurchase program and the significant dividend drop in 2020 should be noted. Interested investors should conduct further research into the company’s future prospects and overall financial health before deciding to invest.

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?

The dividend yield measures the percentage of a company's share price that is paid out in dividends annually. It is a key metric for income-focused investors because it indicates the return on investment in the form of dividends.

The dividend yield of Secunet Security Networks (YSN.DE) is 1.9589%, significantly higher than the industry average of 1.12%. Over the last 20 years, Secunet's dividend yield has shown notable fluctuations, with the most significant yield being 2.7397% in 2018. A higher-than-average dividend yield is generally favorable as it suggests that the company is generating sufficient profits to return some to shareholders in the form of dividends. However, investors should also consider that very high yields can sometimes signal underlying problems if they are not sustainable. In comparison, the industry average has remained relatively stable, ranging between 0.42% and 3.61%, indicating more consistent payouts. The current trend of Secunet showing a high yield in the last two years (2.0468% in 2022 and 1.9589% in 2023) could attract dividend investors. Still, it would be prudent to conduct further analysis to ensure this trend is sustainable given the company's overall financial health and prospects.

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

Explain the criterion for Secunet Security Networks (YSN.DE) and why it is important to consider

Explain why the Dividend Growth Rate being higher than 5% is a positive criteria for Secunet Security Networks (YSN.DE).

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

Explain the criterion for Secunet Security Networks (YSN.DE) and why it is important to consider

The Average Payout Ratio criterion, which demands a ratio lower than 65%, is a crucial indicator of a company's capacity to sustain its dividend payments. A lower ratio suggests that the company is using a smaller portion of its profits to pay dividends, thereby potentially retaining more capital for growth and stability. Typically, a moderate payout ratio is often seen as a balanced approach, ensuring decent returns for shareholders while securing funds for reinvestment and operational resilience. Upon examination of the payout ratios from 2003 to 2023, we observe a substantial fluctuation in data points. It is notable that from 2003 to 2013, the payout ratio remains at 0%, indicating no dividend payouts. The average payout ratio over the last 20 years stands at approximately 17.2%, well below the 65% threshold. Interestingly, despite intermittent spikes like those in 2018 (86.63%) and 2021 (83.07%), the company largely maintained a conservative payout strategy. This trend indicates prudent financial planning and effective allocation of earnings, which are generally favorable for long-term investors. Consequently, the company's strategy aligns with the criterion, marking it as a positive indicator of financial health and potential for continued dividend sustainability.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that a company generates sufficient earnings to pay out its dividends without compromising its financial stability.

Analyzing Secunet Security Networks' data, the earnings per share (EPS) and dividends per share (DPS) history demonstrate whether dividends are comfortably covered by earnings. From 2003 to 2012, the company did not distribute dividends despite generating positive EPS in some years; this reflects a cautious approach to preserving capital or potential reinvestment into business operations. Starting from 2013, the dividends per share progressively increased, coinciding with consistent EPS growth. The coverage ratio (Dividends covered by earnings ratio) is a crucial indicator. For instance, in 2014, a coverage ratio of 0.22 indicates that dividends were well within the bounds of earnings. This ratio saw fluctuations, notably peaking at 0.87 in 2018, reflecting a high but unsustainable payout strategy, given the usual upper safe limit of around 0.6-0.7 for growth-oriented companies. In 2021, the ratio still signaled effective coverage at 0.83, indicating solid profitability; however, by 2023, earnings hit zero, ceasing dividend coverage (ratio at 0). Overall, while historical trends show effective coverage, recent volatility necessitates scrutiny. Given the 2023 reported EPS is zero, prudent dividend management is critical moving forward.

Dividends Well Covered by Cash Flow?

The criterion 'Dividends Well Covered by Cash Flow' assesses whether a company generates sufficient free cash flow to cover its dividend payouts. It combines financial stability and prudence.

When evaluating Secunet Security Networks' dividends in relation to its free cash flow over the years from 2003 to 2023, we note mixed trends. In many years, particularly between 2003 and 2012, the dividend was either not paid or well-covered by free cash flow, indicating a prudent and stable approach. Notably, in recent years such as 2022 and 2023, there was a notable unfavorable trend where free cash flow significantly dropped (-9.51M in 2022 and 43.07M in 2021) affecting dividend coverage negatively as indicated by -3.66 multiple in 2022. This implies a potential risk to dividend sustainability during periods of cash flow deficits. However, there are periods where free cash flow has significantly exceeded dividend payments, reflective of strong financial health, like from 2010 to 2017.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors

Analyzing Secunet Security Networks' (YSN.DE) dividends over the past 20 years reveals a remarkable trend. The company began paying dividends in 2014 and has generally exhibited an upward trajectory in its dividend per share. For instance, from 2014 to 2015, the dividend increased from €0.15 to €0.27, a substantial growth of 80%. Such an upward growth pattern is impressive. However, 2019 to 2020 marked the only significant drop, with dividends falling from €2.40 in 2019 to €0.91 in 2020—a 62% decline. Despite this notable drop, the company has made substantial recoveries, with dividend per share reaching €4.02 in 2021, demonstrating a strong rebound and commitment to rewarding shareholders. It is essential to consider that the dividends have remained generally stable and have trended upwards overall. The specific decline in 2020 can be contextualized by external factors such as the COVID-19 pandemic, which created global economic disruptions impacting many firms. Hence, while there was a significant drop, the long-term trend portrays resiliency and a firm commitment toward maintaining and increasing dividends, pointing toward a generally good trend for income-seeking investors.

Dividends Paid for Over 25 Years?

Companies that have consistently paid dividends for over 25 years demonstrate stability and shareholder value commitment, vital for long-term income-seeking investors.

Secunet Security Networks has paid dividends since 2014, which spans approximately 9 years up to 2023. It has not met the criterion of paying dividends for over 25 years, but the upward trend in dividends per share is commendable. Starting from €0.15 in 2014 and increasing to €2.86 in 2023, shareholders have seen significant growth in their dividend income. Though the desired 25-year period is not achieved, the increase in dividend amounts shows a positive outlook and growing financial strength, which can attract income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company is confident in its financial stability and believes its shares are undervalued.

Secunet Security Networks has not shown a consistent pattern of repurchasing its shares over the past 20 years. The company reduced its number of shares only in the years 2008 and 2023, while the majority of the years see no change in share count. Most concerning is the zero number of shares in 2023. This inconsistency and recent trend could be viewed negatively as it does not provide confidence in value appreciation and stability from a stock repurchase perspective. The average reduction over 20 years of -5.0235% further reflects a lack of significant repurchase activity overall.