TE Connectivity Ltd.

(New York Stock Exchange)
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Somewhat Bullish +42

Is It Smart To Buy TE Connectivity plc (NYSE:TEL) Before It Goes Ex-Dividend?

AI-generated analysis

📅 TE Connectivity (NYSE:TEL) stock will trade ex-dividend in 4 days, requiring purchase before May 22nd to be eligible for payment.

💰 The upcoming dividend is $0.78 per share, paid out of a total distribution of $2.84 over the last 12 months.

📊 Current shares at $205.11 yield 1.4% based on trailing dividends, with payments scheduled for June 12th.

🔍 Investors should evaluate dividend sustainability, noting TE Connectivity paid out 29% of profit and 25% of free cash flow last year.

✅ Both profit and cash flow coverage suggest the dividend is sustainable unless earnings drop significantly.

📈 Earnings per share have grown 5.1% on average over the last five years, indicating steady business growth.

💵 The company retains more than half its earnings while paying dividends, allowing for potential future payout increases.

🚀 Over the past 10 years, TE Connectivity has increased its dividend at an average rate of 8.0% per year.

🛡️ Conservative payout ratios suggest the company is investing in growth rather than depleting reserves for distributions.

🔮 Analyst forecasts show a positive long-term outlook despite moderate earnings growth compared to industry peers.

⚠️ Readers are advised not to simply buy the first dividend stock encountered but to review curated lists of strong payers.

📉 Dividend cuts due to business downturns could cause sharp value declines, making sustainability analysis crucial.

Bullish Signals
  • TE Connectivity paid out just 25% of its free cash flow last year, indicating strong coverage and sustainability for the upcoming dividend.
  • The company has grown earnings per share by an average of 5.1% over the last five years, demonstrating steady business growth.
  • Over the past 10 years, TE Connectivity has increased its dividend at approximately 8.0% on average, showing a track record of rewarding shareholders with rising payments.
  • Management is retaining more than half of earnings within the business while growing earnings at a decent rate, which provides flexibility for future dividend increases or reinvestment in growth.
  • Analysts track historical and future estimated earnings and cash flow forecasts for TE Connectivity, suggesting positive long-term visibility.
Risk Factors
  • TE Connectivity's trailing dividend yield is only 1.4% on a share price of US$205.11, which may limit appeal for income-focused investors seeking higher returns.
  • Earnings per share have grown moderately at an average of 5.1% over the last five years, which might not be sufficient for aggressive dividend growth or to offset rising interest rate risks.
  • If business enters a downturn and earnings drop precipitously, TE Connectivity could face significant pressure to cut its dividend, potentially causing the stock value to fall sharply.
  • The company retained more than half of its earnings rather than returning them as dividends, which could indicate limited capital allocation flexibility or cautious management that prioritizes reinvestment over shareholder payouts.
  • Analysts do not universally endorse TE Connectivity for immediate purchase; instead, a curated list is provided suggesting investors should compare multiple strong dividend payers before committing capital.
  • This analysis relies on historical data and forecast models from 17 analysts, which may not factor in recent price-sensitive company announcements or qualitative developments that could alter future earnings.
Full Analysis
TE Connectivity plc (NYSE:TEL) stock is set to go ex-dividend in four days, with the ex-dividend date falling one business day before the record date of May 29. Investors must purchase shares before the close on May 22 to qualify for the upcoming dividend payment, which is scheduled to be distributed on June 12. The specific dividend amount for this quarter is US$0.78 per share. Looking back over the last 12 months, the company has distributed a total of US$2.84 per share to shareholders, resulting in a trailing yield of 1.4% based on the current share price of US$205.11. Fundamentally, the article assesses the sustainability and growth potential of TE Connectivity's dividend policy. The company paid out approximately 29% of its profit and 25% of its free cash flow to shareholders in the last year, indicating that the current dividend level is covered comfortably by earnings and cash generation. Historically, over the past decade, TE Connectivity has increased its dividend payments at an average rate of roughly 8% per year. Earnings per share have grown by an average of 5.1% annually over the last five years, with the company retaining more than half of its earnings for reinvestment rather than immediate distribution. Analyst forecasts suggest continued solid performance, though there may be a desire to see even faster earnings growth in the future. The company's conservative dividend payout ratio combined with steady earnings growth suggests a healthy long-term investment case where dividends can grow through both earnings expansion and potential increases in the payout ratio. The analysis concludes that TE Connectivity looks fundamentally solid regarding its ability to maintain and potentially increase its dividend payments over time.