Cass Information Systems (NASDAQ:CASS) Will Pay A Larger Dividend Than Last Year At $0.29

The board of Cass Information Systems, Inc. (NASDAQ:CASS) has announced that it will be increasing its dividend by 3.6% on the 15th of December to $0.29, up from last year's comparable payment of $0.28. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Cass Information Systems

Cass Information Systems' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Cass Information Systems' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 6.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Cass Information Systems Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $0.468, compared to the most recent full-year payment of $1.12. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year 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.

We Could See Cass Information Systems' Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Cass Information Systems has grown earnings per share at 6.6% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Cass Information Systems Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Cass Information Systems is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Cass Information Systems management tenure, salary, and performance. 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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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.