Last update on 2024-06-27

Zions Bancorp NA (ZION) - Dividend Analysis (Final Score: 6/8)

Zions Bancorp NA (ZION) Dividend Analysis: A comprehensive review with a final score of 6/8 tells you the performance and stability of ZION's dividends.

Short Analysis - Dividend Score: 6

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

The Zions Bancorp NA (ZION) dividend analysis uses an 8-criteria system to evaluate its dividend policy. Key findings include: ZION's dividend yield of 3.7383% surpasses the industry average of 2.76%, indicating potential attractiveness despite historical volatility. The 20-year average dividend growth rate is approximately 22.80%, which is healthy but inconsistent. The average payout ratio is 15.10%, well below the 65% threshold, suggesting financial stability. Dividends have largely been covered by earnings except during the financial crisis. Dividend stability is concerning with a major decrease during 2008-2009 but shows recovery in recent years. ZION has paid dividends for over 25 years, demonstrating long-term commitment. Consistent stock repurchases further indicate shareholder value emphasis.

Insights for Value Investors Seeking Stable Income

Considering ZION's overall strong dividend yield, healthy growth rate, low payout ratio, and long-term dividend payment history, it could be worth looking into for investors. However, the historical volatility in both the dividend yield and stock price, and the dramatic dividend cut during the financial crisis, present potential risks. Investors should weigh the need for stable, predictable income against the potential for higher returns with ZION's more volatile dividends. Overall, ZION seems promising but caution is advised given its historical instability.

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?

Explanation on how dividend yield above industry average is critical and how it is indicative of a potentially attractive investment.

As of 2023, Zions Bancorp NA (ZION) shows a robust dividend yield of 3.7383%, notably surpassing the industry average of 2.76%. This relatively high dividend yield can be attractive to income-focused investors looking for steady returns, as it suggests the company is effective in generating significant shareholder value compared to its peers. Analyzing the last 20 years, ZION's dividend yield has shown substantial variability. For instance, during the financial crisis in 2008, the dividend yield spiked to 6.5687% but then fell drastically to as low as 0.1651% in 2010. This variability continued with a gradual climb to more steady figures in recent years, with yields consistently above 2% since 2018. In comparison, the industry average yield has exhibited less fluctuation, remaining relatively stable, especially post-2008. This suggests that while ZION may offer higher yields at times, it may also come with increased volatility and risk. However, it’s also noteworthy that ZION's stock price has fluctuated significantly over the past two decades. In 2007, the stock price was at a high of $82.44 but nosedived to $12.83 in 2009 and again reached peaks of $63.16 in 2021. Despite these price swings, the ability of ZION to maintain and even gradually increase its dividend per share—from $1.02 in 2003 to $1.64 in 2023—shows resilience in its dividend policy. Overall, while ZION's higher-than-average dividend yield presents a good opportunity for returns on investment, potential investors should also be mindful of the historical volatility in both yield and stock price.

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

The dividend growth rate is the annualized percentage rate of growth of a company's dividend per share. A growth rate higher than 5% is generally considered healthy and reflective of strong performance.

The dividend growth rates for Zions Bancorp NA (ZION) over the past 20 years have fluctuated considerably. With years showing significant increases like 136.36% in 2019 and 225% in 2013, alongside years with negative growth and zero dividends, the average dividend growth rate stands at approximately 22.80%. This figure exceeds the 5% benchmark, suggesting overall strong dividend growth. However, the considerable volatility, particularly the drastic drops and zero-growth years, indicates inconsistency which might concern risk-averse investors. Nonetheless, if we consider the average, ZION has demonstrated a robust ability to increase dividends over the long term.

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

The payout ratio indicates the proportion of earnings a company pays out as dividends to its shareholders. A payout ratio lower than 65% over a long period, such as 20 years, suggests that the company maintains a healthy balance between distributing profits and reinvesting in the business.

For Zions Bancorp NA (ZION), the average payout ratio over the last 20 years is approximately 15.10%. This is significantly below the 65% threshold, indicating a conservative approach to dividends. Despite volatility during the financial crisis in 2008-2009, where negative payout ratios suggest negative earnings, the overall low average ratio indicates the company's earnings are predominantly reinvested in its business. This trend is positive as it implies financial stability and potential for growth.

Dividends Well Covered by Earnings?

This criterion examines whether a company's earnings per share (EPS) are sufficient to cover its dividends per share (DPS). It is vital because a company consistently paying dividends higher than its earnings may face financial strain and sustainability issues.

Looking at Zions Bancorp (ZION) over the years, we observe fluctuating values when comparing EPS to DPS. Between 2003 and 2007, the average coverage ratio was around 0.28, indicating that earnings comfortably covered the dividends. However, during the financial crisis (2008-2010), EPS turned negative, resulting in negative or minuscule coverage ratios, portraying financial difficulty during those years. Post-2010, EPS started to recover, and coverage ratios improved once again, reaching around 0.27 by 2023. These figures suggest that ZION has largely maintained a responsible dividend policy except for the tumultuous period during the financial crisis. Recent trends depict a healthy trajectory with notable improvements in coverage since 2016, which is promising for investors. Overall, the trend is positive, showcasing a rebound in financial stability and prudent dividend management.

Dividends Well Covered by Cash Flow?

Explain the criterion for Zions Bancorp NA (ZION) and why it is important to consider

This criterion assesses whether the company's free cash flow adequately covers its dividend payouts. A ratio above 1 suggests that the dividends are well-covered by cash flow, representing financial stability and sustainability. It indicates that the company generates sufficient cash to not only meet its dividend obligations but also reinvest in its operations or reduce debt.

Stable Dividends Since the Company Began Paying Dividends?

Stable Dividends Over the Past 20 Years. 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.

Examining the dividend per share for Zions Bancorp NA over the past 20 years, it is clear that the company has not maintained stability in its dividend payments. The most notable decrease occurred between 2008 and 2009, where the dividend per share dropped precipitously from $1.61 to $0.10, equating to a 93.8% reduction. This contrasts starkly with the criterion which seeks no drops greater than 20%. Post 2009, Zions has gradually increased its dividends, but the sharp dividend cut during the financial crisis raised significant concerns about its dividend stability. Although recent years show progressive recovery and increments in dividend payments, the financial crisis period introduces a major red flag for income-seeking investors prioritizing dividend stability.

Dividends Paid for Over 25 Years?

Determining whether a company has paid dividends for over 25 years is essential because it indicates the company's long-term financial stability and commitment to returning value to shareholders.

Zions Bancorp has a consistent history of paying dividends for over 25 years, as seen in the provided dataset ranging from 1998 to 2023. The dividend per share has varied, with a noticeable dip during the 2008 financial crisis, reaching as low as $0.04 in 2010-2012. However, the company rebounded and resumed increasing dividends, reaching $1.64 by 2023. This trend is favorable, demonstrating resilience and a long-term commitment to shareholder returns despite economic downturns.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years refers to the company's consistent efforts to buy back its own shares from the market. This action can signal to investors that the company believes its stock is undervalued and aims to return value to shareholders. It's also a way to improve financial metrics such as earnings per share (EPS) by reducing the number of outstanding shares.

From the supplied data, Zions Bancorp NA had varied share counts over the last 20 years, with notable years of repurchases occurring recently from 2018 to 2023. Specifically, the number of shares has declined consistently from 206,501,000 in 2018 to 147,748,000 in 2023. The average repurchase rate over this period is 2.8961%. This downward trend demonstrates the company's commitment to returning value to its shareholders and may suggest that the management perceives the stock to be currently undervalued. Such consistent buybacks generally indicate a positive signal for investors as it aligns with the broader objective of improving shareholder value.