CTS (TSE:4345) Has Announced That It Will Be Increasing Its Dividend To ¥14.00

CTS Co., Ltd.'s (TSE:4345) dividend will be increasing from last year's payment of the same period to ¥14.00 on 2nd of December. This makes the dividend yield 3.1%, which is above the industry average.

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CTS' Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by CTS' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 7.8% over the next year. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for CTS

CTS Doesn't Have A Long Payment History

CTS' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the annual payment back then was ¥3.50, compared to the most recent full-year payment of ¥28.00. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. CTS has seen EPS rising for the last five years, at 14% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

CTS Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that CTS is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in CTS in our latest insider ownership analysis. 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.