AMGN 333.14 (+0.91%)
US0311621009Drug ManufacturersDrug Manufacturers - General

Last update on 2024-06-25

Amgen (AMGN) - Dividend Analysis (Final Score: 6/8)

In-depth analysis of Amgen (AMGN)'s dividend policy using an 8-criteria scoring system, achieving a score of 6/8.

Knowledge hint:
The dividend analysis assesses the performance and stability of Amgen (AMGN) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 6

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

Criteria
Dividend Yield Higher than the Industry Average?
0
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
1
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
1
Dividends Paid for Over 25 Years?
0
Reliable Stock Repurchases Over the Past 20 Years?
1

Amgen (AMGN) was analyzed using 8 criteria to evaluate its dividend policy performance and stability. The analysis covered dividend yield, growth rate, payout ratio, earnings coverage, cash flow coverage, historical dividend payments, share repurchase programs, and track record for paying dividends for over 25 years. Amgen's dividend yield of 2.9581% is slightly below the industry average of 3.29%, but it has shown strong historical growth in both dividends and stock price. Amgen's average dividend growth rate over the last 20 years is 16.84%, exceeding the 5% benchmark. Its payout ratio averages at 32.73%, which is below the 65% benchmark, but has shown recent increases. Dividends are well covered by both earnings and cash flow. Amgen has been paying dividends for 12 years, showing strong growth, but does not meet the 25-year criterion. The company also has a robust share repurchase program, reducing shares significantly over the past 20 years.

Insights for Value Investors Seeking Stable Income

Although Amgen has not paid dividends for over 25 years, its overall performance in the other criteria is strong and positive. This makes it a potentially good investment opportunity for dividend-focused investors who value growth, financial stability, and consistent returns. Potential investors should continue to monitor the payout ratio and dividend coverage ratios for any changes in trends.

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 is a ratio that shows how much a company pays out in dividends each year relative to its stock price. It is important because it provides investors with insights into the return on investment they might expect from holding the stock, purely from dividends. A high yield may indicate a good income source but could also signal financial troubles if unsustainable.

Historical Dividend Yield of Amgen (AMGN) in comparison to the industry average

Amgen's current dividend yield of 2.9581% is slightly lower than the industry average of 3.29%. Over the past couple of decades, Amgen's dividend policy has evolved from not paying any dividends to providing steadily increasing payouts. For instance, the dividend per share has grown from $0 in 2003 to $8.52 in 2023. However, stock price appreciation must also be factored in, where Amgen's price has seen significant growth from $61.79 in 2003 to $288.02 in 2023. This implies that the company has balanced its growth and income goals. While slightly below the industry average, Amgen's dividend yield is backed by strong historical growth in both dividends and stock price, signaling a robust financial strategy.

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

The Dividend Growth Rate represents how much a company's dividend payments have increased annually over a period. Sustained growth above 5% is generally a positive indicator.

Dividend Growth Rate of Amgen (AMGN)

From 2003 to 2010, Amgen (AMGN) did not pay any dividends, as evidenced by the zeros. However, starting from 2011, the company began to issue dividends. Despite the highly variable nature of the Dividend Per Share Ratio in certain years, like a stark peak in 2012 (157.1429%) followed by a considerable drop in 2013 (30.5556%), the ratio portrays a company initially enriching its dividend payouts only to stabilize in recent years. The average dividend ratio over the last 20 years is approximately 16.84%, which successfully exceeds the 5% benchmark. While the growth rate is more erratic than consistent, the overall trajectory points towards sustained long-term growth. The initial period of highly aggressive dividend increases has tapered down into more moderate, sustainable growth in recent years. Hence, this trend can be considered good as it meets and exceeds the desired criterion.

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

The average payout ratio measures the proportion of earnings a company pays shareholders in the form of dividends.

Dividends Payout Ratio of Amgen (AMGN)

Amgen's average payout ratio over the last 20 years is 32.73%, which is well below the 65% benchmark. This suggests that Amgen has effectively maintained a conservative approach to dividend payouts, thereby retaining a substantial portion of earnings for reinvestment, debt repayment, or other purposes. However, it is noteworthy that the payout ratio has approached or exceeded the 65% mark in some recent years. Specifically, in 2017, the payout ratio skyrocketed to 170.84%, which was an anomaly driven by extraordinary factors. In subsequent years, the payout ratio slightly hovered around the 65% mark (2019 and 2021). Therefore, although the long-term trend is favorable, recent increases warrant cautious attention. Overall, maintaining a payout ratio comfortably below 65% empowers Amgen with greater financial flexibility and sustainability in its dividend policy.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings indicates the company's ability to sustain its dividend payouts. This is crucial for income-focused investors because it demonstrates the firm's financial health and its capacity to continue paying dividends in the future. It signifies that the dividends are being paid out of earned profits and not through debt or capital.

Historical coverage of Dividends by Earnings of Amgen (AMGN)

Analyzing Amgen (AMGN)'s dividend coverage, we observe that the company did not start paying dividends until 2011. Since then, Earings Per Share (EPS) has been significantly higher than Dividends Per Share (DPS), signaling good dividend coverage. For example, in 2020, the EPS was $12.39 while the DPS was $6.40, resulting in a coverage ratio of about 1.94, which is excellent. Even in the most recent year, 2023, the EPS stands at $12.55 versus a DPS of $8.52, leading to a coverage ratio of approximately 1.47. Although there is a declining trend in the coverage ratio, it remains above 1, which is generally considered healthy and sustainable. However, the slight downward trajectory warrants close monitoring. Overall, Amgen maintains a solid record of well-covered dividends by its earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow ensure that a company can sustain its dividend payments without compromising its financial health.

Historical coverage of Dividends by Cashflow of Amgen (AMGN)

Amgen (AMGN) has historically maintained a strong ratio of free cash flow to dividend payout, a critical indicator of dividend sustainability. Starting from 2003 to 2008, the company did not pay dividends. However, from 2009 onwards, it initiated dividend payments, with the cash coverage ratio consistently improving. By 2013, the ratio stood at around 25.28%, growing consistently to reach an impressive 61.91% in 2023. This improvement indicates a strengthening cash flow relative to dividend obligations, suggesting a healthy financial backdrop for continued dividend payments. The trend is positive, demonstrating Amgen's ability to sustainably cover its dividends from its robust cash flows, thus providing dividends without jeopardizing the liquidity or financial stability of the company.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Amgen (AMGN) and why it is important to consider

Historical Dividends per Share of Amgen (AMGN)

this trend is good or bad for the given criteria. Discuss your answer with the provided additional informations.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years references a company's track record of consistent dividend payments for more than two decades, often considered a mark of stability and reliability, important for long-term investors.

Historical Dividends per Share of Amgen (AMGN)

Based on the given data, Amgen (AMGN) has only been paying dividends since 2011. Therefore, the company does not meet the criterion of having a track record of paying dividends for over 25 years as it has only been distributing dividends for 12 years. However, the trend in dividend payments shows a consistent increase in the dividend per share from $0.56 in 2011 to $8.52 in 2023. This persistent increase is a positive indicator of Amgen's financial health and its commitment to rewarding shareholders, even though it falls short of the 25-year mark.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchase programs over an extended period suggest strong and stable financial health. Consistent buybacks reduce the number of shares outstanding, potentially increasing earnings per share and signaling management's confidence in the company's future.

Historical Number of Shares of Amgen (AMGN)

Over the past 20 years, Amgen has displayed an impressive and consistent share repurchase program. At the beginning of this period in 2003, the company had roughly 1.346 billion shares outstanding. This number has steadily declined each year and stands at approximately 535 million shares in 2023. With 17 years of reliable repurchases and an average annual reduction of about 4.45%, Amgen's buyback strategy clearly indicates robust financial stability and management's commitment to returning capital to shareholders. This trend is decidedly positive and bolsters confidence in Amgen's long-term valuation.


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