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The board of TE Connectivity Ltd. (NYSE:TEL) has announced that it will be paying its dividend of $0.59 on the 1st of September, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 1.8%, providing a nice boost to shareholder returns.
Check out our latest analysis for TE Connectivity
TE Connectivity's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, TE Connectivity's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 28.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.
TE Connectivity Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.84, compared to the most recent full-year payment of $2.36. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that TE Connectivity has been growing its earnings per share at 15% a year over the past five years. TE Connectivity definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
TE Connectivity Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for TE Connectivity that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.