CTS (TSE:4345) Has Announced A Dividend Of ¥12.50

CTS Co., Ltd. (TSE:4345) will pay a dividend of ¥12.50 on the 2nd of December. This takes the dividend yield to 2.9%, which shareholders will be pleased with.

Check out our latest analysis for CTS

CTS' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by CTS' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 7.9%. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

CTS Is Still Building Its Track Record

It is great to see that CTS has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was ¥3.50, compared to the most recent full-year payment of ¥25.00. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that CTS has been growing its earnings per share at 12% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like CTS' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for CTS that investors should know about before committing capital to this stock. Is CTS not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.