Assessing the Sustainability of Cognizant's Upcoming Dividend
Cognizant Technology Solutions Corp(CTSH, Financial) recently announced a dividend of $0.29 per share, payable on 2023-11-30, with the ex-dividend date set for 2023-11-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Cognizant Technology Solutions Corps dividend performance and assess its sustainability.
What Does Cognizant Technology Solutions Corp Do?
Cognizant is a global IT services provider, offering consulting and outsourcing services to some of the world's largest enterprises spanning the financial services, media and communications, healthcare, natural resources, and consumer products industries. Cognizant employs nearly 300,000 people globally, roughly 70% of whom are in India, although the company's headquarters are in Teaneck, New Jersey.
A Glimpse at Cognizant Technology Solutions Corp's Dividend History
Cognizant Technology Solutions Corp has maintained a consistent dividend payment record since 2017. Dividends are currently distributed on a quarterly basis.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Cognizant Technology Solutions Corp's Dividend Yield and Growth
As of today, Cognizant Technology Solutions Corp currently has a 12-month trailing dividend yield of 1.64% and a 12-month forward dividend yield of 1.67%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Cognizant Technology Solutions Corp's annual dividend growth rate was 10.50%. Extended to a five-year horizon, this rate increased to 15.40% per year.
Based on Cognizant Technology Solutions Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Cognizant Technology Solutions Corp stock as of today is approximately 3.36%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Cognizant Technology Solutions Corp's dividend payout ratio is 0.28.
Cognizant Technology Solutions Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Cognizant Technology Solutions Corp's profitability 9 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Cognizant Technology Solutions Corp's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Cognizant Technology Solutions Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Cognizant Technology Solutions Corp's revenue has increased by approximately 7.70% per year on average, a rate that underperforms than approximately 51.56% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Cognizant Technology Solutions Corp's earnings increased by approximately 3.30% per year on average, a rate that underperforms than approximately 59.12% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 0.90%, which underperforms than approximately 73.21% of global competitors.
Next Steps
Considering Cognizant Technology Solutions Corp's consistent dividend payments, robust dividend growth rate, prudent payout ratio, and high profitability, the company presents a compelling case for value investors with a penchant for stable income streams. However, the growth metrics indicate a need for a cautious approach, as the company shows signs of underperforming in revenue and earnings growth compared to industry peers. Investors would do well to weigh these factors alongside Cognizant Technology Solutions Corp's strategic initiatives and market position before making investment decisions. Will Cognizant's strategy ensure the continuation of its dividend growth streak? Value investors should keep a close eye on these developments.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
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