TE CONNECTIVITY PLC (NYSE:TEL): A Strong Dividend Pick with Growth and Stability

Dividend investing continues to be a favored approach for those looking for consistent income, especially when market unpredictability highlights the value of dependable returns. One way to find strong dividend options is by selecting stocks with high dividend ratings while confirming they have good profitability and financial stability, key signs of long-term viability. TE CONNECTIVITY PLC (NYSE:TEL) appears as a strong choice under this method, showing a mix of yield, growth, and steadiness that matches the objectives of income-focused investors.

Dividend Strength: Yield and Growth

TEL’s dividend performance is notable for its consistency and upward trend, important for investors focused on long-term payouts. The company provides a 1.38% yield, which, though lower than the S&P 500 average of 2.39%, is better than 89.5% of competitors in the Electronic Equipment, Instruments & Components sector. Additionally, TEL has raised its dividend for more than ten years, with an average yearly growth rate of 6.79%. This history of increases reflects the company’s dedication to rewarding shareholders while still investing in growth.

The durability of these payments is further backed by a payout ratio of 54.3%, which stays at a reasonable level. While this ratio is somewhat high, it leaves room for reinvestment and protection against earnings changes. Notably, earnings growth (11.9% YoY) exceeds dividend growth, hinting at potential for future raises without financial strain.

Profitability: Supporting Reliable Dividends

A company’s ability to produce steady profits is crucial for dividend reliability, and TEL performs well here. The firm features:

• A Return on Invested Capital (ROIC) of 13.51%, placing it in the top 10% of its industry, showing efficient capital use.
• Strong operating margins of 19.3%, better than 97.6% of peers, indicating effective pricing and cost control.
• A profit margin of 8.78%, above the industry average, with consistent improvement in recent years.

These figures highlight TEL’s capacity to fund dividends from earnings while keeping flexibility for growth efforts—a balance often lacking in high-yield but financially weaker companies.

Financial Health: Reducing Risk

A company’s financial strength is vital for maintaining dividends, especially during economic challenges. TEL’s health rating of 6/10 shows minor liquidity concerns but overall stability:

• Low debt reliance: A debt-to-equity ratio of 0.39 is cautious, with debt covered by just 1.98 years of free cash flow—far from concerning levels.
• Solvency strength: An Altman-Z score of 4.84 (above the safe mark of 3.0) suggests very low bankruptcy risk, better than 72.6% of industry competitors.
• Shareholder-friendly moves: TEL has decreased shares outstanding over the past five years, improving per-share metrics like EPS and dividend potential.

While liquidity ratios (e.g., quick ratio of 0.96) are weaker than some peers, the company’s solid cash flow and manageable debt reduce short-term risks.

Valuation and Growth: Potential for Gains

TEL trades at a P/E of 24.4, slightly under the S&P 500 average (26.8) and less expensive than 69% of industry peers. Its forward P/E of 22.2 and lower Price/FCF ratio (cheaper than 80.7% of peers) point to undervaluation relative to cash generation. Analysts forecast EPS growth of 9.1% yearly, supported by rising revenue growth (5.97% expected), which could further support dividend increases.

Why These Criteria Matter

This evaluation aligns with the key principles of dividend investing: durability (payout ratio, profitability), growth prospects (dividend growth, earnings path), and risk control (financial health). TEL’s blend of these qualities makes it a contender for investors seeking income with modest capital growth. For more details, see TEL’s complete fundamental analysis report.

Finding More Dividend Opportunities

TEL is one of many stocks picked by our Best Dividend Stocks screen, which selects for high dividend ratings alongside profitability and financial health measures. Investors can modify filters (e.g., yield levels, market cap) to fit their strategy.

Disclaimer: This article is not investment advice. Conduct your own research or consult a financial advisor before making investment decisions.