Should You Buy CTT Systems AB (STO:CTT) For Its 1.4% Dividend?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. CTT Systems AB (STO:CTT) has paid a dividend to shareholders in the last few years. It currently yields 1.4%. Does CTT Systems tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for CTT Systems
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it paying an annual yield above 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does CTT Systems pass our checks?
CTT Systems has a trailing twelve-month payout ratio of 65.8%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect CTT’s payout to fall to 51.4% of its earnings, which leads to a dividend yield of around 1.7%. However, EPS should increase to SEK5.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view CTT Systems as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, CTT Systems produces a yield of 1.4%, which is on the low-side for Aerospace & Defense stocks.
Next Steps:
After digging a little deeper into CTT Systems’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three essential aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for CTT’s future growth? Take a look at our free research report of analyst consensus for CTT’s outlook.
Valuation: What is CTT worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CTT is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
