Yahoo Finance Be Sure To Check Out TE Connectivity Ltd. (NYSE:TEL) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that TE Connectivity Ltd. (NYSE:TEL) is about to go ex-dividend in just 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase TE Connectivity's shares on or after the 18th of May will not receive the dividend, which will be paid on the 2nd of June.
The company's next dividend payment will be US$0.59 per share, on the back of last year when the company paid a total of US$2.36 to shareholders. Based on the last year's worth of payments, TE Connectivity stock has a trailing yield of around 2.0% on the current share price of $120.46. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for TE Connectivity
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TE Connectivity paid out a comfortable 34% of its profit last year. A useful secondary check can be to evaluate whether TE Connectivity generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that TE Connectivity's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see TE Connectivity earnings per share are up 9.2% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, TE Connectivity has increased its dividend at approximately 11% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Has TE Connectivity got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and TE Connectivity is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and TE Connectivity is halfway there. It's a promising combination that should mark this company worthy of closer attention.
While it's tempting to invest in TE Connectivity for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for TE Connectivity and you should be aware of it before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.
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