Last July, my colleague John Oravec dove into the financial health of Stellantis’s dividend, represented on the NYSE as STLA. This Dutch automaker boasts an impressive lineup of 14 brands, including well-known names like Chrysler, Dodge, Ram trucks, Jeep, and Maserati.
At that time, Stellantis’s dividend safety was rated a "B" with a hefty 8.4% yield. While cash flow looked strong, free cash flow was projected to dip by nearly 20% in 2024, preventing a perfect grade. A drop in free cash flow typically dents a stock’s dividend safety rating.
Fast forward to 2025, and we’re revisiting these figures to see how things have shifted. Looking back at past estimates versus current realities is almost like Bob Uecker’s memorable line from Major League, calling a pitch way off course "just a bit outside."
Stellantis was initially projected to rake in close to 10 billion euros in free cash flow. However, it now seems the company ended 2024 with negative free cash flow. But 2025 projections suggest a recovery, forecasting free cash flow to bounce back to €4.8 billion.
Despite this rebound, the €4.8 billion forecast remains less than half of the annual free cash flow Stellantis generated between 2021 and 2023. Given the bleak outlook for 2024, the payout ratio is in the negative, pointing to a challenging scenario. This year’s anticipated €4.8 billion might cover dividend payments just barely, considering Stellantis distributed around €4.4 billion in dividends in 2024. If a similar payout occurs in 2025, the payout ratio would significantly exceed my acceptable 75% threshold.
Since its formation in 2021, Stellantis paid special dividends and started issuing a regular annual dividend in 2022. Over the past two years, the company has notably increased its dividend. The latest payout, issued last May, stood at $1.65 per share, offering shareholders an attractive 11.7% yield at the stock’s current market price. It’s important to note, while financial statements are in euros, dividends are distributed in U.S. dollars.
Stellantis traditionally declares dividends in February or March when announcing full-year earnings, with payments following in May. With the full-year 2024 earnings set to be reported next Wednesday, February 26, clarity on the dividend situation isn’t far off.
Considering the downward trend in free cash flow and a troubling payout ratio, Stellantis’s dividend safety has worsened since last July. Due to these factors, the dividend isn’t considered secure unless there’s a significant improvement in free cash flow.
Dividend Safety Rating: D
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