Last update on 2024-06-27

TE Connectivity (TEL) - Dividend Analysis (Final Score: 7/8)

Analyze TE Connectivity's (TEL) dividend with an 8-criteria scoring system. Current score: 7/8, showing high stability and performance through robust policies.

Short Analysis - Dividend Score: 7

We're running TE Connectivity (TEL) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is a critical metric for investors seeking income, as it indicates the efficiency of returning capital to shareholders.

TE Connectivity's current dividend yield of 1.6584% is significantly higher than the industry average of 0.77%. Historically, TEL's dividend yield has fluctuated, peaking at 3.578% in 2008 during the financial crisis and remaining fairly stable in recent years, reflecting a consistent approach to returning capital to shareholders. Given that the stock price has generally appreciated over the years—from $37.13 in 2007 to $140.5 in 2023—the current yield suggests an attractive return for income-focused investors. The company's ability to sustain a yield above the industry average (even during economic downturns) emphasizes its robust dividend policy and financial strength, making it a potentially good investment for dividend seekers.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for TE Connectivity (TEL) and why it is important to consider

The dividend growth rate reflects a company's long-term policy toward returning profits to shareholders. Consistent and sustainable dividend growth is a positive signal of a company's financial health, stability, and commitment to delivering value. A growth rate higher than 5% indicates robust earnings growth and confidence in future profitability.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years

A low payout ratio indicates that a company is retaining a considerable portion of its earnings for reinvestment and future growth. A payout ratio higher than 65% could signal that the firm is prioritizing dividend payments over growth strategies, potentially jeopardizing its financial health. Conversely, a lower ratio suggests a balanced approach to dividends and sustainable growth.

Dividends Well Covered by Earnings?

Explain the criterion for TE Connectivity (TEL) and why it is important to consider

Dividends are well covered by the earnings ratio indicates how well the company's earnings can cover its dividend payments. This ratio measures the sustainability of dividend payments, indicating whether the company generates enough profit to cover its dividend obligations.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

One vital indicator of a company's financial health and its ability to sustain dividend payments is the proportion of dividends covered by free cash flow. It is essential to have a sizeable amount of cash flow after operating expenses, which should ideally cover dividend payouts. This ensures that a company is not over-leveraging itself or utilizing reserves to fulfill its dividend promises.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Examining TE Connectivity's dividend per share data over the past 20 years reveals a consistent upward trend in dividend payments. Beginning in 2007, when the first dividends were paid out, the company has shown a significant increase from $0.14 per share to $2.33 per share in 2023. This substantial growth highlights TE Connectivity’s commitment to delivering shareholder value through steady dividend increases. There was a slight drop from $2.12 in 2018 to $1.82 in 2019, approximately a 14% reduction, and this was the only significant fluctuation, not exceeding 20%. The resilience demonstrated through this single anomaly signals strong management and a robust business model since it was still within acceptable limits. The rest of the trajectory demonstrates a healthy and progressive dividend policy, indicating that income-seeking investors can rely on TE Connectivity for a stable income stream.

Dividends Paid for Over 25 Years?

Identify if the company has been consistent in paying dividends over a period of 25 years. Consistent dividend payments indicate strong financial health and stability.

The data provided shows that TE Connectivity has been paying dividends consistently since 2007. Before that, from 2002 to 2006, there were no dividends paid. Hence, it has been 16 years of continuous dividend payments as of 2023. This is a positive indicator of financial stability and can boost investor confidence, although it falls short of the 25-year mark. The increasing trend in dividend per share, from $0.14 in 2007 to $2.33 in 2023, demonstrates robust profitability and commitment to returning value to shareholders.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years refers to the company's consistent and stable program of buying back its own shares from the market. This is an important marker for shareholder value as buybacks can reduce the number of shares outstanding, thereby increasing the value of existing shares. Additionally, it reflects the management’s confidence in the company’s future performance.

TE Connectivity (TEL) has shown a reliable trend in repurchasing its shares over the past 20 years. The data indicates a consistent reduction in the number of shares outstanding. For example, in 2003, the company had 495,652,174 shares outstanding, which decreased to 315,000,000 shares by 2023. This translates to an average annual repurchase rate of about 2.2118%. The most significant drops in shares outstanding appear to have occurred post-2014, suggesting a robust repurchase strategy in the recent decade. Such a trend is generally viewed positively as it tends to boost earnings per share (EPS) and demonstrates a strong commitment from the company towards returning value to its shareholders. Moreover, consistent buybacks can also signal that the company's management believes its shares are undervalued.