July 08, 2025 a 12:46 pm
CTSH: Dividend Analysis - Cognizant Technology Solutions Corporation
Cognizant Technology Solutions shows a promising dividend profile with a growing dividend yield and stable payout ratios. Their prudent financial management ensures that dividends are sustainable and potentially increasing, making it a compelling choice for income-focused investors. Let's delve deeper into the various financial metrics that support this outlook.
📊 Overview
| Metric | Value |
|---|---|
| Sector | Technology |
| Dividend yield | 1.50 % |
| Current dividend per share | 1.21 USD |
| Dividend history | 9 years |
| Last cut or suspension | None |
The company's consistent dividend payments over the past 9 years and a yield close to 1.5% highlight its reliability as a dividend payer. The absence of any recent dividend cuts is indicative of solid financial health.
📈 Dividend History
The historical dividend payments provide insight into dividend stability and appreciation potential. An increasing dividend over the years suggests a strong, growing company that prioritizes shareholder returns.
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 0.62 |
| 2024 | 1.20 |
| 2023 | 1.16 |
| 2022 | 1.08 |
| 2021 | 0.96 |
📈 Dividend Growth
Understanding dividend growth is crucial because it reflects the company's earnings power and management's confidence in future cash flows. Consistent growth suggests a healthy financial outlook.
| Time | Growth |
|---|---|
| 3 years | 7.72 % |
| 5 years | 8.45 % |
The average dividend growth is 8.45% over 5 years. This shows moderate but steady dividend growth, indicating sustained corporate performance and profitability.
📉 Payout Ratio
The payout ratio is essential for evaluating dividend sustainability. A manageable ratio indicates that the company retains enough earnings to reinvest in growth while rewarding shareholders.
| Key figure | Ratio |
|---|---|
| EPS-based | 25.35 % |
| Free cash flow-based | 27.94 % |
The low EPS and FCF payout ratios of 25.35% and 27.94% show that Cognizant has a comfortable buffer to maintain or increase dividends, indicating strong earnings and cash flow management.
🗣️ Cashflow & Capital Efficiency
These metrics are crucial for understanding the company's financial health and ability to cover dividends with operational cash flows and fund future growth.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 4.79 % | 5.28 % | 7.55 % |
| Earnings Yield | 5.87 % | 5.57 % | 7.73 % |
| CAPEX to Operating Cash Flow | 13.98 % | 13.61 % | 12.93 % |
| Stock-based Compensation to Revenue | 0.87 % | 0.91 % | 1.34 % |
| Free Cash Flow / Operating Cash Flow Ratio | 86.02 % | 86.39 % | 87.07 % |
The cash flow metrics highlight efficient capital management and a strong capacity to generate free cash flow relative to earnings, underlining sustainable dividend payments.
⚠️ Balance Sheet & Leverage Analysis
An understanding of leverage and liquidity positions helps assess the overall financial stability and debt management strategies of the company.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 10.27 % | 9.94 % | 12.46 % |
| Debt-to-Assets | 7.41 % | 7.11 % | 8.59 % |
| Debt-to-Capital | 9.31 % | 9.04 % | 11.08 % |
| Net Debt to EBITDA | -0.21 | -0.39 | -0.18 |
| Current Ratio | 2.09 | 2.25 | 2.17 |
| Quick Ratio | 2.09 | 2.25 | 2.17 |
| Financial Leverage | 1.39 | 1.40 | 1.45 |
Cognizant maintains a conservative leverage profile with negative net debt to EBITDA, indicating a strong capacity for debt repayment and an adept approach to balancing leverage and liquidity.
🗣️ Fundamental Strength & Profitability
Profitability ratios highlight efficiency and the ability to convert revenue into actual profit. Key metrics such as MR, ROE, and margins reflect the firm's operational efficiency.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 15.55 % | 16.07 % | 18.60 % |
| Return on Assets | 11.22 % | 11.50 % | 12.83 % |
| Net Profit Margin | 11.35 % | 10.98 % | 11.79 % |
| EBIT Margin | 15.16 % | 14.61 % | 15.62 % |
| EBITDA Margin | 17.84 % | 17.29 % | 18.55 % |
These financial metrics underscore Cognizant's strong profitability, operational efficiency, and commitment to reinvesting profits into growth, honing a competitive edge in the technology sector.
📈 Price Development
✅ Dividend Scoring System
| Criteria | Score | Indicator |
|---|---|---|
| Dividend Yield | 3 | |
| Dividend Stability | 4 | |
| Dividend Growth | 4 | |
| Payout Ratio | 5 | |
| Financial Stability | 5 | |
| Dividend Continuity | 4 | |
| Cashflow Coverage | 4 | |
| Balance Sheet Quality | 5 |
Overall Score: 34/40
🗣️ Rating
Cognizant Technology Solutions demonstrates strong dividend sustainability and growth prospects, supported by robust financial health and prudent capital management. Suitable for long-term investors seeking stable dividend income with potential for capital appreciation. Recommendation: Buy.