On January 16, 2021, the merger between two automotive titans – Fiat Chrysler Cars and PSA Group – was accomplished to type Stellantis (NYSE: STLA).
Three days later, shares of Stellantis IPO’d on the New York Inventory Trade.
Since then, the corporate has elevated its dividend yearly, with its present dividend of simply over $1.65 equating to a yield of 8.4%. (Apparently, it pays only one annual dividend fairly than making 4 quarterly payouts.)
The massive query, although, is whether or not its dividend is sustainable or vulnerable to being slashed sooner or later.
Let’s crunch some numbers to see the place it stands… and to offer a solution for Rich Retirement reader Yariv, who left us a Fb remark final week asking us to evaluate Stellantis’ dividend.
As all the time, let’s check out the corporate’s free money movement.
A giant cause that Stellantis has been capable of elevate its dividend yearly is its free money movement progress.
Free money movement in 2021 was just below $10 billion. In 2022, it rose to over $11.3 billion, and in 2023, it topped $12.2 billion.
That comes out to an outstanding compound progress price of 51.9%!
Nonetheless, analysts are skeptical that Stellantis can proceed rising its free money movement at such a torrid tempo.
Ahead-looking estimates point out a lower of almost 20% within the subsequent yr.
Happily, that appears to be the one menace to the corporate’s dividend.
Regardless of elevating its dividend in every of the previous three years, the corporate nonetheless has a wholesome payout ratio. In 2023, Stellantis paid out $4.2 billion of its $12.3 billion in free money movement for a payout ratio of 34.2%, which is effectively under our threshold of 75%.
The payout ratio ought to climb this yr because of the projected decline in free money movement – however solely to 44.5%.
With the forward-looking free money movement estimates as my solely concern, I’m comfortable to provide this inventory’s dividend security a strong “B.”
Dividend Security Score: B
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