CTS (TSE:4345) Is Paying Out A Larger Dividend Than Last Year

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 will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

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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 means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 7.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

View our latest analysis for CTS

CTS Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2017, the dividend has gone from ¥3.50 total annually to ¥28.00. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. CTS has seen EPS rising for the last five years, at 13% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like CTS' Dividend

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. All of these factors considered, we think this has solid potential as a dividend stock.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in CTS 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.