Cass Information Systems, Inc.'s (NASDAQ:CASS) dividend will be increasing from last year's payment of the same period to $0.29 on 15th of December. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.
Cass Information Systems' Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Cass Information Systems' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share could rise by 6.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 48% 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. The dividend has gone from an annual total of $0.468 in 2012 to the most recent total annual payment of $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 9.5% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Cass Information Systems has grown earnings per share at 6.6% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
We Really Like Cass Information Systems' Dividend
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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. See if management have their own wealth at stake, by checking insider shareholdings in Cass Information Systems stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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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