DTS Corporation (TSE:9682) has announced that it will pay a dividend of ¥50.00 per share on the 21st of November. This takes the dividend yield to 2.8%, which shareholders will be pleased with.
View our latest analysis for DTS
DTS' Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, DTS was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 14.1% over the next year. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥15.00 in 2014 to the most recent total annual payment of ¥110.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
DTS May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 2.8% per year. DTS is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
In Summary
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
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. Taking the debate a bit further, we've identified 1 warning sign for DTS that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSE:9682
Flawless balance sheet with reasonable growth potential and pays a dividend.
