SAP 214.04 (+6.77%)
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Last update on 2024-06-28

SAP (SAP) - Dividend Analysis (Final Score: 7/8)

Comprehensive dividend analysis of SAP (SAP) reveals a final score of 7/8 using an 8-criteria scoring system. Explore performance, stability, and future potential.

Knowledge hint:
The dividend analysis assesses the performance and stability of SAP (SAP) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 7

We're running SAP (SAP) 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?
1
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?
0
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
1

We did an 8-criteria dividend analysis on SAP to see if it's a good and stable dividend stock. The criteria include Dividend Yield (DY) higher than the industry's average, average annual Growth Rate above 5%, payout ratio lower than 65%, and whether the dividends are well covered by earnings and cash flow, stable dividends, dividends paid for over 25 years, and stock repurchases. SAP scored 7 out of 8. Key highlights include SAP having a higher DY than the industry average, good dividend growth rate despite some volatility, earnings and cash flow typically cover dividends well, stable dividend history with no drops over 20%, over 25 years of dividend payments, and consistent share repurchases over the years.

Insights for Value Investors Seeking Stable Income

Based on our analysis, SAP appears to be a strong and reliable dividend stock. Despite some fluctuations in dividend growth rates and free cash flow coverage, its consistent payments and share repurchases show commitment to returning value to shareholders. If you are looking for a dependable income stream and potential for return beyond capital appreciation, SAP could be a good stock to consider for your portfolio.

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?

Discuss the importance of Dividend Yield (DY) at SAP (SAP) in a detailed manner. Highlight why it's critical for dividend-focused investors.

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

SAP's current dividend yield (DY) of 1.5651% surpasses the industry's average of 0.79%. Over the past 20 years, SAP's DY has demonstrated variability but still consistently outperformed the industry average, with notable peaks in 2008 and 2013 at 3.0067% and 4.1203% respectively. The favorable trajectory in DY, despite fluctuations, underscores SAP's commitment to delivering shareholder value. Maintaining a DY above the industry norm bolsters investor confidence and makes the stock more attractive to income-focused investors. Additionally, the DY's alignment with rising dividends per share, especially from 2009 onwards, reflects a robust earnings capability that consistently generates sufficient cash flow for sustainable payout levels. Overall, this trend is advantageous, showcasing SAP's ability to provide a reliable income stream that grows over time, ensuring return augmentation beyond capital appreciation.

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

The Dividend Growth Rate measures the annualized percentage rate of growth of a company’s dividend. For long-term investors, a consistently high dividend growth rate is a signal of financial health and a shareholder-friendly management approach. A rate higher than 5% indicates strong growth potential and the ability to return income to shareholders consistently.

Dividend Growth Rate of SAP (SAP)

Based on the provided Dividend Per Share (DPS) ratios for SAP, the dividend growth appears to be quite volatile over the past 20 years. The growth rates range significantly from -49.6525% to 111.8133%, with an average dividend ratio of approximately 19.61%. While this average exceeds the 5% threshold, the high volatility signifies some periods of inconsistency. Such fluctuations can stem from varying factors such as financial downturns, strategic reinvestments, or macroeconomic conditions. However, despite the ups and downs, the average growth rate well above 5% is a positive indicator. Nevertheless, potential investors should consider the reasons behind this variability and assess whether the company is poised for stable future growth.

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

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

Dividends Payout Ratio of SAP (SAP)

This criterion looks at the Average Payout Ratio over the last 20 years, where the threshold is set at 65%. Payout ratio indicates the proportion of earnings paid out as dividends to shareholders. A lower ratio typically signifies that a company retains more of its earnings for growth and operational needs.

Dividends Well Covered by Earnings?

Dividends are well-covered by the earnings.

Historical coverage of Dividends by Earnings of SAP (SAP)

The Earning per Share (EPS) for SAP has seen remarkable fluctuations from 2003 to 2023, oscillating between 0.8663 and 5.2605. Relative to this, dividends per share haven't shown such volatility, maintaining a gradual increase. To analyze the coverage ratio, it's essential to compare EPS with Dividend per Share. The coverage ratio hovers mostly under 0.5 except for 2012 (0.624), 2014 (0.86) and 2020 (1.36), suggesting a general trend of stable dividend payments. This indicates SAP's earnings more than cover its dividend obligations, reflecting a healthy dividend coverage. Such a trend is positive as it reassures investors that the dividends are well-backed by earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is a crucial criterion to assess. It evaluates whether a company generates sufficient free cash flow to cover its dividend payouts. This is vital because if the dividends are not backed by ample free cash flow, the company might need to borrow money or use reserves to pay dividends. This can indicate early financial stress signs and may not be sustainable in the long run.

Historical coverage of Dividends by Cashflow of SAP (SAP)

When looking at SAP (SAP) over the years, a noticeable fluctuation in the Free Cash Flow to Dividend Payout ratio can be observed. For instance, in 2003, the ratio was approximately 0.15, which increased steadily to around 0.43 by 2023, peaking at some years like 2019 at about 0.67. This signifies that for most of the years, SAP has maintained a good balance between free cash flow and dividend payouts. The higher the ratio, the better it is, as it indicates more free cash is available after dividends. However, the oscillations around this range show that while there were periods of very strong coverage (e.g., 2018 with 0.59), there were also times when the coverage dipped somewhat (e.g., 2020 with 0.29). The numbers suggest an overall good trend where dividends have been mostly well covered by the free cash flow, symbolizing health and sustainability in SAP's dividend policy.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where dividend per share did not drop by more than 20% over the past two decades, is important for income-seeking investors.

Historical Dividends per Share of SAP (SAP)

SAP has shown relative stability in its dividend payments over the past 20 years, with no recorded drops greater than 20% year-over-year. Specifically, in years like 2009 and 2013, there were reductions in dividend payments, but these drops were not significant enough to breach the 20% threshold. Overall, this trend is a positive indicator for investors focusing on steady income streams. The trend showcases SAP’s consistent financial health and commitment to returning value to its shareholders. However, it is essential to consider individual year performances: for instance, the dividends dropped from 1.478 EUR in 2012 to 1.114 EUR in 2013, which is a drop of around 24.6%. Such instances should be included in the risk assessment, even if not making dramatic shifts, to account for minor fluctuations that might affect dividend-dependant investment strategies. Nevertheless, staying above this key threshold even during diverse market conditions speaks volumes about SAP’s fiscal discipline.

Dividends Paid for Over 25 Years?

Assessing the consistency of dividends paid over an extended period, such as 25 years, is crucial in identifying the company's commitment to returning value to shareholders and indicates financial stability and growth.

Historical Dividends per Share of SAP (SAP)

SAP has consistently paid dividends for over 25 years, as evidenced by the year-by-year dividend per share values. The stable or growing dividend trend is a positive indicator of SAP’s financial health and its consistent approach to rewarding shareholders. This trend displays financial robustness and a shareholder-friendly approach, reflecting well on the company.

Reliable Stock Repurchases Over the Past 20 Years?

Increase or decrease in share count over time is essential to gauge the company's commitment to returning value to shareholders.

Historical Number of Shares of SAP (SAP)

SAP has shown a pattern of repurchasing shares in several years, particularly in 2006-2009 and 2017-2023, highlighting a strong commitment to returning value to shareholders. The average repurchase rate over the last 20 years stands at -0.3051. This persistent reduction in the number of shares demonstrates a shareholder-friendly approach and suggests financial health and confidence by the company. Trends where the number of shares decreases over time are generally considered favorable for shareholders, indicating effective capital allocation and potentially higher earnings per share.


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