Cass Information Systems' (NASDAQ:CASS) Dividend Will Be Increased To $0.30

Cass Information Systems, Inc. (NASDAQ:CASS) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of December to $0.30. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Cass Information Systems

Cass Information Systems' Payment Has Solid Earnings Coverage

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 Cass Information Systems' 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 24.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Cass Information Systems Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.546, compared to the most recent full-year payment of $1.20. This means that it has been growing its distributions at 8.2% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Cass Information Systems May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 3.1% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 3.1% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Cass Information Systems Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Cass Information Systems stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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