Last update on 2024-06-27

Deutsche Bank (DB) - Dividend Analysis (Final Score: 3/8)

Dividend analysis for Deutsche Bank (DB) with a final score of 3/8. Performance and stability evaluated using 8-criteria scoring system.

Short Analysis - Dividend Score: 3

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

The dividend analysis for Deutsche Bank (DB) uses an 8-criteria scoring system to assess the performance and stability of its dividend policy. Unfortunately, Deutsche Bank scored a 3 out of 8, indicating several weaknesses. Although there is a positive trend in the dividend yield from 2022 to 2023, it's still slightly below the industry average. The bank's dividend growth rate is highly inconsistent, with an average annual growth rate of -1.637%, far below the target of 5%. While the average payout ratio is a conservative 44%, its volatility highlights periods of significant financial instability. The dividends' coverage by earnings and cash flow has been erratic, with some years showing poor or negative coverage. Suspending dividends in certain years reveals inconsistency in their financial strategy. Their stock repurchase strategy is also mixed, with significant fluctuation over the past 20 years. Overall, the analysis conveys that Deutsche Bank's dividend policy lacks consistency and reliability, reflecting the bank's unstable financial performance over the past two decades.

Insights for Value Investors Seeking Stable Income

Given Deutsche Bank's inconsistent dividend history, poor average annual dividend growth rate, and volatility in dividend coverage by earnings and cash flow, this stock does not appear to be a reliable choice for income-focused investors. While there are some positive trends in recent years, the overall uncertainty and erratic financial performance make it a risky investment for those seeking stable and growing dividend payouts. Investors should consider stocks with a more stable and dependable dividend history.

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?

Explain the criterion for Deutsche Bank (DB) and why it is important to consider

Dividend yield is the dividend income expressed as a percentage of the current share price. Deutsche Bank's dividend yield of 2.6547% is slightly lower than the industry average of 2.76%. Historically, Deutsche Bank's dividend yield has shown significant fluctuation over the past 20 years, peaking at an all-time high of 15.4608% in 2008, followed by several years of drastic reductions and complete suspension in 2016 and 2020. Most recently, the company’s dividend yield improved from 1.9619% in 2022 to 2.6547% in 2023, indicating a positive trend. Despite being below the industry average, the improving dividend yield, combined with a gradual increase in the stock price (rebounding to a close at $13.55 in 2023), suggests a stronger financial position relative to previous years, making it a potential area of interest for dividend-focused investors.

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

Evaluating whether the dividend growth rate of Deutsche Bank has been higher than 5% on an annualized basis in the last 20 years? This criterion measures how consistently a company increases its dividend payouts over time. A higher dividend growth rate generally signals a healthy and growing business, potentially attractive to income-focused investors.

The given data indicates significant fluctuations in Deutsche Bank's dividend growth rate over the past 20 years. With values ranging from -100% to 87.7699%, it shows that Deutsche Bank has had periods of substantial dividend payouts and severe dividend cuts, including years with no dividend payout at all. The erratic pattern, especially the steep decreases and complete omissions, showcases inconsistency and potential financial instability. The average dividend ratio over this period is -1.637%, far from the 5% annual growth target. This trend is unfavorable for income-focused investors looking for reliable and growing dividends.

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

Examining the Average Payout Ratio over a 20-year period is critical as it reflects the company's ability to sustain its dividend payments relative to its net income.

The Average Payout Ratio of Deutsche Bank over the last 20 years stands at approximately 44%, which is significantly below the 65% threshold. This indicates a generally conservative payout policy, aligning with financial prudence. However, the ratios exhibit high volatility, especially in 2012 (439.88%) and 2013 (167.37%), indicating irregularities in profit or dividend distribution during those years. Additionally, negative or zero ratios in years such as 2008, 2016, and 2019-2021 reflect periods of losses. While the low average ratio is positive for long-term sustainability, the volatility suggests underlying financial instability occasionally impacting dividend reliability.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings

Analyzing the Earnings per Share (EPS) and the Dividend per Share (DPS) for Deutsche Bank, it is evident that the bank's ability to cover its dividends with earnings has varied significantly over the past two decades. For instance, in 2007, the EPS was 10.1364, whereas the DPS was 3.8168, resulting in a coverage ratio of approximately 0.377, indicating strong cover. However, during periods of negative EPS, such as 2008 and 2015, the coverage ratios turned sharply negative or zero (2008: -0.727, 2015: -0.191), reflecting poor coverage. The trend recovered slightly post-2015 but remained volatile, with some years showing zero dividends. More recently, the coverage ratio improved to about 0.326 in 2023. Fluctuations in the coverage ratio spotlight Deutsche Bank's inconsistent profit-generating capacity, making dividends sometimes risky and less secure when EPS is low or negative. This volatility is generally unfavorable as steady and well-covered dividends signal a financially strong institution.

Dividends Well Covered by Cash Flow?

explain the criterion for Deutsche Bank (DB) and why it is important to consider

Analyzing the free cash flow and dividend payout amount over a span of 20 years for Deutsche Bank (DB), the trend of dividend coverage by cash flow shows a concerning pattern. A well-covered dividend is critical as it indicates that a company can pay its dividends using its operational cash flows, hence ensuring sustainability.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for Deutsche Bank (DB) and why it is important to consider

Stable dividends over the last 20 years, where the dividend per share does not drop by more than 20%, are crucial for income-seeking investors. These dividends provide financial confidence and steady income backed by the company’s sound financial performance, which reduces risk for the investor.

Dividends Paid for Over 25 Years?

Dividends paid consistently over a long period, such as 25 years, are a sign of a company's stability and commitment to shareholder value. It indicates the company's ability to generate sufficient cash flow.

Looking at Deutsche Bank's (DB) dividend history over the past 25 years, we observe inconsistent dividend payments with the presence of several zeros, specifically in 2016, 2020, 2021. Additionally, there were periods of reduction or nominal increments, which reveal volatility amidst some years of strong dividends. For instance, the dividends peaked at 4.2939 in 2008 but experienced significant drops thereafter. Inconsistent dividends may reflect operational challenges or strategic shifts. Overall, this trend is a red flag for those valuing steady income, emphasizing the need for potential investors to understand the underlying reasons for such fluctuations.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that a company is committed to returning value to shareholders through buybacks, reducing the number of shares, thus increasing the value of remaining shares.

Over the past 20 years, Deutsche Bank has seen fluctuations in its share count. While the institution did repurchase shares intermittently in years such as 2004, 2005, 2007, and notably from 2020 to 2023, there were also significant increases in other years. These inconsistencies, especially the noticeable rise in the number of shares from 2009 to 2017, mark periods perhaps of capital raising or other financial strategies, underlining potential volatility. Though recent years have shown a return to repurchasing with an average repurchase ratio of 5.6114%, overall, the trend is mixed, suggesting inconsistency in their buyback strategy. This inconsistency may potentially dampen investor confidence.