HNR1.DE 239.3 (+0.29%)
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Last update on 2024-06-27

Hannover Rueck (HNR1.DE) - Dividend Analysis (Final Score: 3/8)

Comprehensive analysis of Hannover Rueck's (HNR1.DE) dividend performance using an 8-criteria system, yielding a final score of 3 out of 8 in 2023.

Knowledge hint:
The dividend analysis assesses the performance and stability of Hannover Rueck (HNR1.DE) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 3

We're running Hannover Rueck (HNR1.DE) 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?
0
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?
0
Dividends Paid for Over 25 Years?
0
Reliable Stock Repurchases Over the Past 20 Years?
0

Hannover Rueck (HNR1.DE) scored 3 out of 8 based on the 8-criteria dividend analysis. Key areas of concern include a significantly lower current dividend yield compared to the industry average, a negative average dividend growth rate, and inconsistent dividend coverage by both earnings and cash flow. While the company maintains a low average payout ratio and has shown stock repurchase reliability, there are periods where dividends were not paid, or coverage was insufficient. This inconsistency may be troubling for income-focused investors.

Insights for Value Investors Seeking Stable Income

Given the low and inconsistent dividend yield, along with the negative average dividend growth rate and mixed coverage metrics, Hannover Rueck might not be the best choice for investors seeking stable and growing income from dividends. While the company shows promising stock price growth and a conservative payout approach, potential investors should carefully consider these risk factors and possibly look at other companies with more stable and robust dividend records.

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 Hannover Rueck (HNR1.DE) and why it is important to consider

Historical Dividend Yield of Hannover Rueck (HNR1.DE) in comparison to the industry average

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is an important measure for investors as it indicates income generated from investment. Hannover Rueck's current dividend yield of 0.4623% is significantly lower than the industry average of 3.11%. Given the last 20 years' data, Hannover Rueck has had higher dividend yields, yielding more than both zero and over 8%. This markedly lower yield raises concerns about income generation for investors. While the dividend per share has declined from a high of €4.5 in 2021 to €1 in 2023, the stock price has generally been on an upward trajectory, closing at €216.3 in 2023, compared with €27.72 in 2003. This trend reflects Hannover Rueck's solid stock price growth but might be seen as disappointing for income-focused investors due to the consistently decreasing dividend yield.

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

Evaluating the Dividend Growth Rate is essential as it reflects the company's ability to increase shareholders' returns over time.

Dividend Growth Rate of Hannover Rueck (HNR1.DE)

The 20-year average Dividend Growth Rate for Hannover Rueck (HNR1.DE) stands at -3.46%. The data shows significant fluctuations, with some years experiencing negative growth, such as -100% in 2006 and 2009, contrasted with years of strong growth, notably 200% in 2021. However, the negative average suggests instability and inconsistency in dividend payouts. This trend is not favorable for investors seeking regular and growing income streams. Stable and growing dividends usually indicate robust financial health and efficient earnings management.

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

The payout ratio indicates the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. It provides insights into the company's dividend policy and financial stability. A lower payout ratio often suggests that the company is retaining more earnings for growth and sustainability, while a higher payout ratio could imply potential risk of dividends being reduced if earnings decline.

Dividends Payout Ratio of Hannover Rueck (HNR1.DE)

Over the past 20 years, the average payout ratio for Hannover Rueck (HNR1.DE) has been 11.10%, which is significantly lower than the benchmark of 65%. This trend is predominantly positive, indicating that the company maintains a conservative approach to dividend distributions, preferring to reinvest a substantial portion of its earnings back into the business. The occasional occurrence of negative or zero payout ratios likely reflects periods of financial turbulence or strategic decisions to retain earnings entirely, but these are balanced out by years of moderate and stable payout ratios. Such a low average payout ratio bodes well for the company's long-term growth prospects and financial health, reducing the risk of dividend cuts during economic downturns.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings indicates the company's ability to sustain its dividend payouts without compromising its financial stability. It's an important criterion for income-focused investors.

Historical coverage of Dividends by Earnings of Hannover Rueck (HNR1.DE)

Analyzing Hannover Rueck's data, it is clear that their dividends have not always been well-covered by earnings. In certain years (e.g. 2003, 2007, 2014-2018), the dividend coverage ratio is below 1, indicating that dividends exceeded earnings. The extraordinary low points in 2003, 2008, and 2020 of negative or zero coverage ratios are concerning. For example, in 2008 and 2020, high dividends were paid despite earnings losses, which is not a sustainable practice. Conversely, in more recent years like 2021, the coverage improved significantly to 0.44, showing better alignment of dividends with earnings. Overall, while there are some positive years, Hannover Rueck's inconsistent coverage suggests periods of potential payout risk, which could be negative for long-term dividend reliability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow examines if the company's free cash flow can support its dividend payments. It ensures sustainability.

Historical coverage of Dividends by Cashflow of Hannover Rueck (HNR1.DE)

Looking at Hannover Rueck's (HNR1.DE) free cash flow and dividend payout data from 2003 to 2023, we see a mixed trend. Initially, the dividend coverage was low or non-existent (e.g., 2004-2006 at 0%). From 2007 onwards, there are variable but improving coverage ratios, peaking at 38.2% in 2017. However, the ideal ratio should be closer to or above 100%, where free cash flow sufficiently covers dividends. A positive note is that the trend shows improvement, but consistency and higher coverage are necessary for long-term dividend sustainability. The zero values for 2023 indicate withholding dividends, possibly due to insufficient free cash flow. It's a cautious but positive trend overall.

Stable Dividends Since the Company Began Paying Dividends?

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.

Historical Dividends per Share of Hannover Rueck (HNR1.DE)

Based on the data provided, Hannover Rueck does show some inconsistencies in its dividend payouts. Particularly, there are instances where no dividends were paid out at all, namely in 2006 and 2009, which is a more severe drop than 20%. Additionally, from 2021 to 2022, there was a significant drop from 4.5 per share to 1.25 per share. Having said that, the overall trend from 2003 to 2023 shows general growth and recovery post-crises. The shortcomings bring down the perception of stability and may deter very risk-averse, income-seeking investors, despite the progressively increasing dividends in various years.

Dividends Paid for Over 25 Years?

This criterion assesses whether the company has a history of paying dividends consistently over the long term.

Historical Dividends per Share of Hannover Rueck (HNR1.DE)

According to the provided data, Hannover Rueck (HNR1.DE) has had a varied history of paying dividends. Despite some gaps (like in 2002, 2006, 2009), the company has managed to pay dividends in most of the last 23 years. The sporadic dividend payments could be indicative of fluctuating profitability or strategic financial decisions. The trend shows a mix of years with dividends and years without, reflecting a certain inconsistency. This might be seen as a negative signal for long-term dividend stability. However, in recent years from 2020 to 2023, dividends have remained constant or increased, which is a positive sign. Overall, while the company has a relatively long history of paying dividends, the lack of absolute consistency is a point of consideration for potential investors looking for stable dividend payouts.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases is a measure of how consistently a company buys back its own shares. It's important as it can signal management's confidence in the company's value and can improve EPS.

Historical Number of Shares of Hannover Rueck (HNR1.DE)

Hannover Rueck has shown reliability in stock repurchases over the past 20 years, with repurchase events recorded in 2009, 2012, 2014, 2016, 2017, 2019, and 2022, equating to an average repurchase consistency of 0.1881. This is a positive trend as consistent buybacks can signal management's confidence in the company's intrinsic value and provide shareholders with increased earnings per share (EPS) by reducing the outstanding share count. Although seven out of the last 20 years having repurchases shows a moderate level of ongoing buybacks, this level of repurchase activity does help to reinforce a value creation strategy over the long term. In addition, considering the static or slightly fluctuating nature of the share count in other years, it can be interpreted that Hannover Rueck’s management takes a balanced approach, repurchasing shares only when it is perceived to be value-accretive.


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