Last update on 2024-06-27

Olympic Steel (ZEUS) - Dividend Analysis (Final Score: 4/8)

Discover the performance and stability of Olympic Steel (ZEUS) through our comprehensive 8-criteria dividend analysis, yielding a final score of 4/8.

Short Analysis - Dividend Score: 4

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

Olympic Steel (ZEUS) was evaluated on its dividend performance using 8 criteria. The overall dividend score was 4 out of 8. 1. Dividend Yield: ZEUS has a low yield (0.7496%) compared to the industry average (2.98%), making it less attractive for income-focused investors. 2. Dividend Growth Rate: ZEUS shows inconsistent growth with significant volatility and years with zero payments. 3. Payout Ratio: ZEUS has an ultra-low payout ratio of 2.99% on average, suggesting sustainability. 4. Earnings Coverage: Earnings often do not cover dividends, indicating risks in sustainability. 5. Cash Flow Coverage: Cash flow coverage has been inconsistent but shows positive signs in recent years. 6. Dividend Stability: Dividends have been inconsistent before 2006, stabilizing somewhat in recent years. 7. Dividend History: ZEUS has not paid dividends for over 25 consecutive years (started in 2006). 8. Stock Repurchases: Limited stock buybacks, suggesting focus may be elsewhere.

Insights for Value Investors Seeking Stable Income

Given the fluctuating dividend performance and the low yield, ZEUS does not appear particularly attractive for dividend-focused investors. The low payout ratio does suggest stability, but inconsistent earnings and cash flow coverage present some risks. Potential investors might be more interested in ZEUS for capital gains opportunities rather than reliable dividend returns. Careful consideration and further research into the company’s future prospects and financial strategies are recommended before investing.

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?

Understand the historical and recent dividend yields. Determine whether the stock has higher or lower yield than the industry average, which indicates relative income attractiveness.

Olympic Steel (ZEUS) shows a dividend yield of 0.7496% in 2023, significantly underperforming the industry average of 2.98%. Historically, ZEUS has seen fluctuating dividends with significant peaks, e.g., 2008 at 5.7928%. Recent trends show improvement since 2021 with yields above their long term averages but still lagging the industry. This low yield may indicate either a cautious approach in dividend distribution possibly in prioritizing reinvestment or insufficient profit generation. Comparatively lower yield is unattractive for income-focused investors. On the other hand, the stock price climbed to 66.7 USD in 2023 from 33.58 USD in 2021, suggesting shareholder value creation more through capital gains recently. However, income-seeking investors may be wary given the historical inconsistency in dividends.

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

criterion for Olympic Steel (ZEUS) and why it is important to consider

The Dividend Growth Rate analysis involves measuring the year-over-year change in the dividend per share ratio over a specific period. A consistent growth rate of over 5% is often deemed positive, reflecting financial robustness and shareholder value emphasis. For Zeus, the data from 2003 to 2023 shows erratic dividend ratios. While there were years with spike peaks like 742.8571% in 2008 and -90.678% in 2009, indicating dividend payment cut followed by a massive increment, this volatility doesn't reflect stability or consistency. Post-2011, the data shows numerous years with zero dividend payments, rebounding only in 2022 (350%) and exhibiting mixed signals in 2023 (38.8889%). Therefore, Olympic Steel's dividend growth does not demonstrate a stable upward trend over the 20-year span. This trend is considered unfavorable.

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

The payout ratio is a key metric for dividend investors, as it indicates what proportion of earnings a company is distributing to shareholders in the form of dividends. Generally, a payout ratio of less than 65% is considered healthy and sustainable as it suggests that the company is retaining sufficient earnings to reinvest in the business or cushion against economic downturns.

Based on the data provided, Olympic Steel (ZEUS) has an average payout ratio of 2.99% over the last 20 years. This figure is significantly lower than the threshold of 65%, indicating excellent dividend sustainability. The company rarely pays out a high percentage of its earnings as dividends, which allows it to maintain financial flexibility and resilience. The few instances of negative payout ratios occurred during years of net losses, further affirming that the company is cautious with its distributions. Overall, this ultra-low average payout ratio is highly favorable, suggesting conservative management and sustainability in dividend payments.

Dividends Well Covered by Earnings?

The criterion assesses whether a company's earnings comfortably cover its dividend payments. This is crucial as it ensures the sustainability of dividends. If earnings are insufficient, the company may struggle to maintain or grow the dividend, negatively impacting investors who rely on these payments.

For Olympic Steel (ZEUS), the Earnings per Share (EPS) data from 2003 to 2023 reveals volatile performance with years of negative earnings, particularly in 2009, 2013, 2014, and 2019. Despite this volatility, the company has consistently paid out dividends from 2006 onwards albeit modestly until recent increases in 2022 and 2023. The coverage ratio is often less than 1, indicating that earnings frequently do not cover the dividends, posing a risk to the sustainability of these dividends. Positive coverage ratios in some years, especially in recent times, are encouraging but give a mixed overall picture.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow ensure that a company can sustain its dividend payments without jeopardizing its financial stability. Consistent positive cash flow coverage indicates strong financial health.

Examining the provided data, the free cash flow (FCF) of Olympic Steel (ZEUS) demonstrates both positive and negative values across the years, indicating periods of cash flow volatility. Remarkably, in 2019 and 2022, the company reported substantial free cash flows of $119,393,000 and $165,999,000, respectively. In 2023, the free cash flow is slightly lower at $153,833,000 but still robust. On the other hand, the dividend payout amounts have been relatively stable with a peak of $12,816,000 in 2008 and an increase to $5,566,000 in 2023. The dividend coverage ratios show variances, swinging from negative values—indicating that dividends were paid despite negative cash flow—to positive coverage between 2007 and 2023, for instance, in 2023, the ratio was 0.036, showing improvement. These figures suggest that while there have been years of insufficient FCF to cover dividends entirely, recent years indicate better coverage with improving trends, which is a positive sign if this stability is maintained. Nonetheless, the historical inconsistency might be concerning for risk-averse investors.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Olympic Steel (ZEUS) and why it is important to consider

Analysis of Olympic Steel's (ZEUS) dividends over the past two decades

Dividends Paid for Over 25 Years?

This criterion examines whether Olympic Steel has consistently paid dividends for over 25 years. Stability in dividend payments can indicate financial health and shareholder value.

Olympic Steel does not meet the criterion of having paid dividends for over 25 consecutive years, as evidenced by the data provided. The company started paying dividends in 2006, with a dividend of $0.12 per share. The dividends have been relatively stable since 2007 with minor fluctuations, generally hovering around $0.08 per share, up until recent years. Notably, there were no dividends paid in the years prior to 2006. However, a substantial increase to $0.36 per share was observed in 2021 and further to $0.50 per share in 2023, reflecting possible financial improvement or strategic shifts. Despite this upward trend, the lack of consistent dividends for the first 8 years in the provided dataset makes it ineligible for the 25-year consistent dividend payer status.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years indicate the company's commitment to returning value to shareholders and optimizing capital structure.

Analyzing Olympic Steel's (ZEUS) stock repurchase trend over the past 20 years, we can see that the company has had limited stock buybacks, with notable repurchase years only being 2009 and 2020. This pattern reflects a cautious approach to capital allocation. Specifically, the average number of shares repurchased stands at around 0.9233%, which indicates that repurchases were not a prominent strategy for ZEUS in this period. This trend is arguably not very strong for enhancing shareholder value through buybacks. If the goal is to achieve consistent shareholder returns, this could be viewed negatively. However, it might also suggest that the company prioritizes other investment opportunities or has faced financial constraints that limit the ability to repurchase shares consistently.