Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see TTEC Holdings, Inc. (NASDAQ:TTEC) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 31st of March in order to be eligible for this dividend, which will be paid on the 16th of April.
TTEC Holdings’s upcoming dividend is US$0.34 a share, following on from the last 12 months, when the company distributed a total of US$0.64 per share to shareholders. Based on the last year’s worth of payments, TTEC Holdings stock has a trailing yield of around 2.0% on the current share price of $33.94. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to investigate whether TTEC Holdings can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately TTEC Holdings’s payout ratio is modest, at just 37% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What’s good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.
It’s positive to see that TTEC Holdings’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re encouraged by the steady growth at TTEC Holdings, with earnings per share up 2.6% on average over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the last five years, TTEC Holdings has lifted its dividend by approximately 14% a year on average. We’re glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Has TTEC Holdings got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and TTEC Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but TTEC Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. It’s a promising combination that should mark this company worthy of closer attention.
So while TTEC Holdings looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example – TTEC Holdings has 2 warning signs we think you should be aware of.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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