Last update on 2024-06-27

Fresenius SE (FRE.DE) - Dividend Analysis (Final Score: 6/8)

Fresenius SE (FRE.DE) dividend analysis reveals the performance and stability of its dividend policy, scoring 6 out of 8 on an 8-criteria system. Discover more!

Short Analysis - Dividend Score: 6

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

Fresenius SE (FRE.DE) has shown mixed performance according to the 8-criteria scoring system for dividend policy evaluation. With a high dividend yield significantly above the industry average, it appears attractive for income-focused investors. However, the fluctuation in dividend yields over 20 years raises concerns about sustainability. The company has an average annual Dividend Growth Rate (DGR) slightly above 5%, but inconsistencies question its reliability. While maintaining a reasonable average annual payout ratio, the declining dividend coverage from earnings and cash flows indicate possible strain. Dividend stability is further undermined by significant drops in certain years, despite having paid dividends consistently for 24 years. Poor performance in share buybacks adds to the volatility concerning long-term stability and shareholder value maximization.

Insights for Value Investors Seeking Stable Income

Given these mixed results, Fresenius SE carries potential for income but also significant risks. Investors should be cautious and perhaps consider other more stable dividend-paying stocks, especially if they prioritize consistent and reliable income. Thorough research and a careful assessment of risk tolerance are recommended before investing in this company.

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 measures the annual dividend income an investor receives per dollar invested in a stock. It is crucial as it indicates the return received on the dividend payouts relative to the stock's price, and how it compares against industry competitors.

For Fresenius SE (FRE.DE), the current dividend yield of 3.2775% is significantly higher than the industry average of 0.9%. Over the past 20 years, Fresenius SE has experienced widely fluctuating dividend yields, peaking at over 15% in 2003 and bottoming out at below 1% in 2015-2016. This volatility indicates that the company's ability to consistently pay dividends has varied significantly but has mostly stayed well above the industry average since 2019. The current higher-than-average yield could indicate that the company is a relatively strong dividend payer within its industry, making it potentially attractive for income-focused investors. However, it also raises concerns about the sustainability of such high yields given the fluctuating trends observed in previous years.

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

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth of a company's dividend over time. For Fresenius SE, focusing on a DGR higher than 5% in the last 20 years signifies a robust performance and suggests the company's capability to consistently increase dividends. This stability is critical for attracting income-focused investors who prioritize growing dividend income.

The Dividend Per Share Ratio data for Fresenius SE shows fluctuating values over the past 20 years, with extreme peaks and troughs. Notably, years with significant negatives (-61.4865 in 2007 and -64.8 in 2015) offset exceptionally high ratios (110 in 2020). The average dividend ratio stands at 6.072. Despite achieving an average above 5%, the inconsistencies reflect an unreliable trend. The positive aspect for investors is the few notable increases, but the negative dips and high volatility question the sustained and predictable dividend growth sought by prudent investors. Overall, this trend can be seen as mixed, but leaning towards a less favorable outlook due to inconsistency.

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

Explain the criterion for Fresenius SE (FRE.DE) and why it is important to consider

The average payout ratio measures the percentage of earnings a company distributes to shareholders in the form of dividends. A ratio below 65% over the last 20 years generally indicates a company's ability to sustain its dividend payments while retaining sufficient earnings for growth and financial stability.

Dividends Well Covered by Earnings?

Dividend coverage ratio is a critical metric for investors as it indicates the safety and sustainability of dividends. It is calculated by dividing Earnings per Share (EPS) by Dividends per Share (DPS). A higher ratio suggests that the company generates enough earnings to cover its dividend payments multiple times over, thereby providing a cushion for adverse periods.

The data provided indicates significant volatility in the Earnings per Share (EPS) for Fresenius SE. Despite the early 2000s showing relatively stable figures, fluctuations became more pronounced from 2006 onwards. Particularly notable is the sharp decline in EPS in 2023, dropping to -1.0546, signaling a potential financial strain. The Dividend per Share (DPS), on the other hand, exhibits a general upward trend with occasional decreases. However, since 2019, the dividend has plateaued at 0.92. Over the years, the dividend coverage ratio has deteriorated; by 2023, it has plummeted to a negative value of -0.872, raising concerns about dividend sustainability. With the EPS unable to cover the DPS in 2023, it is a critical point of concern for investors. Continuation of this trend is unsustainable and alarming for potential future dividend payouts.

Dividends Well Covered by Cash Flow?

Dividends should be well-covered by free cash flow to ensure the company can sustain its dividend payouts without compromising its financial health. This ratio indicates how comfortably a company can pay dividends from its free cash flows.

Fresenius SE's free cash flow and dividend payout amounts show a mixed trend concerning dividend coverage. From 2003 to 2005, no dividends were paid despite positive free cash flow, implying emphasis on reinvestment or debt repayment. Between 2006 and 2014, the company's cash flow reasonably covered its dividends, maintaining a dividend coverage ratio above 0.26, which got even healthier in some years like 2008 (0.78) and 2014 (0.47). However, 2015 marked a downturn with an outflow of free cash, causing a negative coverage ratio and signalling strained financial conditions. In recent years, the coverage ratio varied, with notable dips like 2018 (1.73) indicating a potentially precarious position. Positive outlook resurfaced in 2021 and 2022 with ratios at around 0.52, revealing a more balanced coverage by free cash. Yet in 2023, the ratio fell to 0.17, raising caution about future sustainability of dividend payouts if free cash flows don't improve. Overall, the fluctuating trend suggests that while Fresenius SE has periods of robust dividend coverage, inconsistencies raise concerns about long-term dividend sustainability, marking a volatile outlook for risk-averse investors seeking stable dividend income.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years must be observed to ensure that the dividend per share did not drop by more than 20%. It is important for income-seeking investors who rely on consistent dividend payouts for their income.

The analysis of Fresenius SE (FRE.DE) dividend per share data over the last 20 years indicates significant volatility in certain years. Notably, dividends per share dropped by more than 50% in 2007, 2015, and 2020. For instance, in 2007 the dividend fell from 1.48 to 0.57, a 61.5% decline. Similarly, in 2015 and 2020, dividends dropped by 64.8% and 52.4% respectively. Although recent dividends have rebounded and stabilized, such substantial declines highlight instability making it unfavorable for income-seeking investors.

Dividends Paid for Over 25 Years?

The consistency of dividends over a long period indicates financial stability and reliability in returning value to shareholders.

Over the past 24 years, Fresenius SE has paid out dividends every year, demonstrating a consensus in their commitment to returning capital to shareholders. This consistent track record suggests a degree of financial maturity and resilience, essential characteristics for potential investors seeking stability. However, there are substantial fluctuations in the dividend per share, notable reductions during years like 2007 and 2015, which could raise concerns about the company's ability to generate stable earnings. The increase over time, albeit unsteady, has generally been positive, indicating an overall upward trend. Given that the test requires over 25 years of dividend payments, Fresenius is just shy of this milestone with 24 years. Nevertheless, the consistency shown up to this point is commendable and bodes well for the future.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases mean a company is consistently buying back its own shares over the years, signaling strong confidence in its future prospects and often improving shareholder value.

The data for Fresenius SE (FRE.DE) shows that from 2003 to 2023, the number of shares has generally increased, with only two years (2018 and 2021) showing share repurchases. In 2018, the number of shares slightly decreased from 557,506,980 to 557,304,502, and in 2021, it marginally decreased from 558,474,682 to 558,061,878. These decreases are minor and do not indicate a significant trend of stock repurchases. Over the 20-year period, the average repurchase rate is 14.4367, which is relatively low, implying that Fresenius SE has not consistently prioritized share buybacks. This could be seen as unfavorable for investors looking for consistent share repurchases as a means of returning value.