TT Electronics' (LON:TTG) Dividend Will Be £0.0225
The board of TT Electronics plc (LON:TTG) has announced that it will pay a dividend of £0.0225 per share on the 15th of October. This takes the dividend yield to 4.2%, which shareholders will be pleased with.
See our latest analysis for TT Electronics
TT Electronics' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. TT Electronics is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 41%, which makes us pretty comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from £0.054 total annually to £0.068. This means that it has been growing its distributions at 2.3% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 56% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think TT Electronics will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, TT Electronics has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is TT Electronics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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About LSE:TTG
TT Electronics
Provides design-led advanced electronics technologies for performance critical applications in the healthcare, aerospace and defense, and automation and electrification markets in the United Kingdom, Rest of Europe, North America, Asia, and internationally.
Very undervalued with moderate growth potential.