Ushering in good news for its shareholders, TE Connectivity Ltd. TEL has announced a 12% hike in its dividend payout to a quarterly payment of 37 cents per share or $1.48 per share on an annualized basis. Notably, the current dividend hike has been approved by the company’s board of directors and will be presented at the company's Annual General Meeting for shareholders’ approval on Mar 2, 2016.
If approved, this will mark the sixth consecutive year of double-rate dividend increase by TE Connectivity. Based on the closing price of $66.67 on Dec 2, 2015, the proposed dividend affirms a yield of 2.2%. A steady dividend payout is part of the long-term strategy of TE Connectivity to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
Prior to the current hike, TE Connectivity had declared an increase in its dividend in March 2015, when it raised the quarterly dividend payout from 29 cents to 33 cents per share. Prior to that, the company raised the quarterly dividend payout in March 2014 from 25 cents to 29 cents per share. The company also increased its quarterly dividend in March 2013 from 21 cents to 25 cents.
Also, the strength of TE Connectivity’s business model is reflected in its strong cash generation capabilities. As of Sep 30, 2015, the company had a cash and cash equivalents of $3,329 million, up from $2,457 million as on Sep 26, 2014.
TE Connectivity’s strong balance sheet position provides it the financial flexibility required for consistently rewarding its shareholders through dividends and share repurchases. In fiscal 2015, the company returned $1.7 billion to its investors in the form of dividend and share repurchases. Moreover, going forward, TE Connectivity expects to use nearly $3 billion of the proceeds garnered from the BNS divestiture for repurchasing shares. Such initiatives boost investors’ confidence in the stock.
TE Connectivity currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Fabrinet FN, LightPath Technologies, Inc. LPTH and Sparton Corp. SPA. All stocks carry a Zacks Rank #1 (Strong Buy).
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