DTS' (TSE:9682) Dividend Will Be Increased To ¥60.00
DTS Corporation (TSE:9682) has announced an increase in its dividend to ¥60.00, payable on June 26, yielding 2.6%, above the industry average. The dividend is well-covered by cash flow and earnings, with an estimated payout ratio of 57% for the next year, indicating sustainability. Despite a strong historical growth rate of 20% CAGR over the past decade, past cuts raise caution about future growth, as earnings per share have only grown by 4.4% annually in the last five years. Overall, the raised dividend is a positive sign, but investors should consider other factors before investing.
The board of DTS Corporation (TSE:9682) has announced that it will be paying its dividend of ¥60.00 on the 26th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 2.6%, which is above the industry average.
View our latest analysis for DTS
DTS' Payment Could Potentially Have Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, DTS' 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.
The next year is set to see EPS grow by 14.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥17.50 in 2015, and the most recent fiscal year payment was ¥110.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
DTS May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, DTS has only grown its earnings per share at 4.4% per annum over the past five years. DTS is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
Our Thoughts On DTS' Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for DTS that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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