JPM 210.7 (+0.2%)
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Last update on 2024-06-25

JPMorgan Chase (JPM) - Dividend Analysis (Final Score: 4/8)

JPMorgan Chase (JPM) dividend analysis reveals a score of 4/8, evaluating stability and performance with an 8-criteria scoring system.

Knowledge hint:
The dividend analysis assesses the performance and stability of JPMorgan Chase (JPM) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 4

We're running JPMorgan Chase (JPM) 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?
0
Stable Dividends Since the Company Began Paying Dividends?
0
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
0

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?

Criterion 1: Dividend yield 2.381% is higher than the industry average 3.24%. This could be indicative of several factors including the company's financial stability, investor sentiment, and payout policy. Compared to the industry, a higher yield can either signal a potential value trap or strong attractiveness of the stock. Examining long-term historical data is crucial in establishing the right context for interpreting this metric.

Historical Dividend Yield of JPMorgan Chase (JPM) in comparison to the industry average

The current dividend yield of 2.381% for JPMorgan Chase is actually lower than the industry average of 3.24%. Historically, JPM have had varied dividend yields fluctuating greatly, such as peaking to 4.8208% in 2008 and dropping to as low as 0.4715% in 2010. Comparison of yields across years demonstrates relative stability post-2010 with yields staying within 2.1% to 3% range. The industry's yield significantly spiked in 2006 and 2007 but then normalized. This fluctuation can often be linked to underlying market conditions and investor sentiment during financial turmoil periods like 2008-2009. As dividends often reflect corporate earnings' strength, JPM's consistent increases in absolute dividend payments over the years (from $1.36 per share in the early 2000s to $4.05 in 2023) are pro-shareholder. Nevertheless, focusing solely on yield may be misleading since higher yields can sometimes result from declining stock prices.

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

The Dividend Growth Rate criterion assesses whether the company's dividend per share has increased by more than 5% annually over the last 20 years. This measurement is crucial as it indicates the company's ability to consistently increase payouts to shareholders, signaling strong financial health and a shareholder-friendly policy.

Dividend Growth Rate of JPMorgan Chase (JPM)

Analyzing the Dividend Growth Rate for JPMorgan Chase (JPM) based on the provided data, we see a highly volatile pattern in the dividend changes per share, with significant fluctuations in certain years, for example +300% in 2011 and -65.1316% in 2009. The average Dividend Growth Rate stands at approximately 17.52%, which is substantially higher than the 5% benchmark. However, the consistency of these increases is questionable, given the variability. Positive interpretation: The high average growth rate is a positive sign indicating the company's overall strong capacity to return capital to shareholders. Negative interpretation: The significant fluctuations raise concerns about the sustainability of this high growth rate.

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

The average payout ratio being considered is crucial since it indicates the proportion of earnings distributed as dividends to shareholders, influencing both dividend stability and growth potential. A payout ratio lower than 65% suggests a company retains enough earnings to reinvest in growth and navigate economic downturns.

Dividends Payout Ratio of JPMorgan Chase (JPM)

By analyzing the data provided, JPMorgan Chase (JPM) has an average payout ratio of 34.62% over the past 20 years. This is significantly below the 65% threshold, indicating a conservative and sustainable approach to dividend payments. Given this trend, the company has adequately balanced rewarding shareholders while retaining sufficient earnings for operational resilience and growth initiatives. Year-to-year variations also reflect a disciplined adjustment based on annual performance, particularly the notably low payout ratios during the years following the 2008 financial crisis. This conservative dividend policy bodes well for future stability and potential dividend growth, making it favorable to long-term investors.

Dividends Well Covered by Earnings?

When evaluating a company's ability to sustain its dividend payouts, it is crucial to ensure that its earnings can comfortably cover the dividends. This is commonly assessed by the payout ratio, indicating how much of the company's earnings are used to pay dividends. A lower ratio suggests better coverage and sustainability.

Historical coverage of Dividends by Earnings of JPMorgan Chase (JPM)

From 2003 to 2023, JPMorgan Chase experienced fluctuating Earnings Per Share (EPS) and Dividend Per Share (DPS). The coverage ratio has varied significantly, dropping to below 50% multiple times, indicating that in some years, earnings struggled to cover the dividends. For instance, in 2010, the coverage was as low as 0.0457, suggesting that earnings were barely able to cover 4.57% of dividends. In contrast, during 2008 and 2009, coverage was higher due to lower dividend payouts but not sufficient. While there has been improvement in certain years such as 2014 and 2020, where coverage was around 27.22% and 38.09% respectively, this trend overall suggests a concern for dividend sustainability. Despite having high EPS in recent years like 2019 and 2021, the constant increase in DPS risks future coverage if there's any downturn in earnings. This reflects both good and bad trends; good for stable or growing dividends in positive earning years, but risky for sustainability in an economic downturn.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Historical coverage of Dividends by Cashflow of JPMorgan Chase (JPM)

The trend for JPMorgan Chase shows that their free cash flow has been highly volatile from 2003 to 2023. Several years, especially after 2007, exhibit negative free cash flows, complicating dividend payments. 2008 and 2010 saw free cash flows reaching -$110.56 billion and $121.897 billion respectively. Such volatile numbers negatively affect dividend coverage, exemplified in extreme fluctuations in the proportions; for instance, negative coverage in multiple years like -201.34% in 2005 and 39.61% in 2010. However, certain years like 2019 and 2023 present significantly positive covers, 204.15% and 103.77%, indicating sufficient free cash flow to cover dividends. JPMorgan Chase's ability to maintain dividends and payout amounts increasingly over 20 years, despite fluctuating coverage, shows resilience. Nonetheless, consistent negative coverage points to a not stable trend, denoting a need for cautious optimism.

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 JPMorgan Chase (JPM)

Examining the dividend payments for JPM from 2003 to 2023 reveals a drop of more than 20% in 2009 and 2010. The dividends per share decreased from $1.52 in 2008 to $0.53 in 2009, which is approximately a 65% drop, and further to $0.2 in 2010, another significant drop by 62%. However, aside from those years affected by the Great Recession, JPMorgan Chase has consistently increased its dividend payments over the years, recovering swiftly with a dividend of $0.8 in 2011 and continued growth thereafter. This trend shows JPM's resilience and commitment to shareholders. Despite the significant drops during the economic downturn, the overall trend indicates a recovering and steadily growing dividend, reflecting robust financial health and management acumen in the long-term, making it a generally good trend considering historical economic contexts.

Dividends Paid for Over 25 Years?

The analysis examines if JPMorgan Chase has consistently paid dividends for at least 25 years.

Historical Dividends per Share of JPMorgan Chase (JPM)

JPMorgan Chase has paid consistent dividends from 1998 through 2023, demonstrating its commitment to returning value to shareholders over a long horizon. The slight dip in dividends per share in 2009 and 2010 reflects the impact of the financial crisis, but the company quickly rebounded. This trend is positive and indicates strong financial health and commitment to shareholders, particularly impressive in the face of economic downturns.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluating the historical consistency of stock repurchases is vital for shareholders as it signals management’s confidence in the company’s value and can enhance shareholder value through reduced share count and increased earnings per share.

Historical Number of Shares of JPMorgan Chase (JPM)

JPMorgan Chase has demonstrated a pattern of consistent stock repurchases over the last two decades, particularly concentrated in the years from 2007 onwards. From 2007 to 2023, the number of shares has generally decreased from 3.508 billion to 2.9386 billion. This consistent reduction in shares indicates a strong buyback program. Although there were fluctuations and occasional increases in shares until 2010, the trend since then has been predominantly downwards. The average repurchase rate of 2.2622% per year supports this trend. This consistent buyback activity is beneficial for shareholders as it often leads to increased earnings per share and signals the company's confidence in its financial health.


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