TE Connectivity plc (NYSE:TEL) will increase its dividend on the 10th of June to $0.71, which is 9.2% higher than last year’s payment from the same period of $0.65. This takes the dividend yield to 1.8%, which shareholders will be pleased with.
TE Connectivity’s Future Dividend Projections Appear Well Covered By Earnings
If the payments aren’t sustainable, a high yield for a few years won’t matter that much. Prior to this announcement, TE Connectivity’s dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 56.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% 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 2015, the annual payment back then was $1.16, compared to the most recent full-year payment of $2.60. This means that it has been growing its distributions at 8.4% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
TE Connectivity Could Grow Its Dividend
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that TE Connectivity has grown earnings per share at 6.4% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we’ve picked out 1 warning sign for TE Connectivity that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.