Updated 3/6/25
Cass Information Systems may not be the flashiest stock out there, but for those who appreciate steady dividend income, it’s worth a closer look. This company operates in the financial services sector, specializing in payment processing for businesses across industries like utilities, telecom, and freight. It has carved out a niche in handling complex transactions, which has helped it generate reliable revenue streams over time.
The stock is currently trading at $43.38, with a market cap of about $584 million. While it isn’t a large-cap powerhouse, it has built a reputation for stable dividend payouts. Over the past year, the stock has fluctuated between $37.99 and $49.16, and with a beta of 0.69, it tends to be less volatile than the broader market.
For investors looking at Cass primarily for its dividend, there’s a lot to unpack—so let’s dive into the numbers and see if it’s a strong fit for an income portfolio.
Key Dividend Metrics
📈 Forward Annual Dividend Yield: 2.86%
💰 Forward Annual Dividend Rate: $1.24
🔄 5-Year Average Dividend Yield: 2.75%
📆 Next Dividend Date: March 14, 2025
⚠️ Payout Ratio: 87.05%
📉 Quarterly Earnings Growth YoY: -45.40%
Dividend Overview
Cass has maintained a consistent dividend, which is an encouraging sign for income-focused investors. Right now, the company is yielding around 2.86%, which is slightly above its 5-year average of 2.75%. That’s a decent payout, though not the highest among dividend stocks.
What stands out is the 87% payout ratio, meaning Cass is paying out nearly all of its earnings in dividends. That’s on the high side. Ideally, companies should keep their payout ratio under 60% to allow room for reinvestment and future increases. While Cass has managed to keep paying dividends despite a shrinking earnings base, this level of distribution could limit future growth if profits don’t pick back up.
Dividend Growth and Safety
Cass has a history of steady dividend payments, but with earnings down 45.4% year-over-year, the sustainability of those payments is something to watch closely. The company has continued increasing dividends in the past, but with such a high payout ratio, further hikes may not be guaranteed.
One red flag is negative levered free cash flow of -$103.72 million. That suggests the company may be relying on other means—like existing cash reserves—to fund dividends. While this isn’t a crisis in the short term, it’s worth keeping an eye on.
Cass last executed a 6-for-5 stock split in 2018, but that doesn’t have a direct impact on dividends. Overall, while the company has a solid history of paying out to shareholders, its ability to grow dividends from here will depend heavily on improving cash flow and earnings.
Chart Analysis
Price Action and Moving Averages
Cass Information Systems (CASS) has been trading in a choppy manner over the past year, with clear shifts in momentum. The stock has struggled to maintain a consistent uptrend, experiencing multiple pullbacks along the way. Right now, it’s trading near $43.38, with price action attempting to reclaim higher levels after bouncing from recent lows.
The 50-day moving average (orange line) has been trending downward for much of the chart, signaling short-term weakness. However, the stock has recently climbed above it, which could suggest a shift in momentum if sustained.
Meanwhile, the 200-day moving average (blue line) remains relatively flat, showing that the longer-term trend isn’t decisively bullish or bearish. The fact that price is currently hovering around this level makes it a key area to watch—if CASS can hold above it, further upside could be in play.
Volume Trends
Trading volume has been relatively steady, with occasional spikes. A particularly notable surge occurred in July, coinciding with a sharp price move. These volume bursts suggest institutional activity, but they haven’t led to a sustained breakout.
Recently, volume has been more muted, indicating that the latest price moves may not have strong conviction behind them. If buying pressure increases alongside price strength, it could confirm a more solid trend reversal.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart has been climbing, indicating improving momentum. It hasn’t yet reached overbought levels, meaning there could still be room for price appreciation before hitting a potential resistance zone.
If RSI continues to rise while price stabilizes above key moving averages, it would reinforce a more bullish outlook. However, if it begins to roll over, it could signal that the stock is losing momentum.
Support and Resistance Levels
The $42 level has acted as an important support zone in recent months, with price bouncing off this area multiple times. On the upside, $45 appears to be a key resistance level, as price has struggled to hold above this point on previous attempts.
For any continued upside move, breaking and holding above $45 would be significant. If the stock fails to clear that level, another pullback toward $42 or lower could be in play.
Analyst Ratings
Cass Information Systems (CASS) has experienced notable shifts in analyst perspectives over the past year, reflecting changes in the company’s performance and market conditions.
In February 2024, Piper Sandler analyst Frank Schiraldi upgraded CASS from “Hold” to “Buy,” raising the price target from $45 to $51. This upgrade was attributed to improved financial metrics and a positive outlook on the company’s growth prospects.
However, by July 2024, Schiraldi adjusted his stance, reiterating a “Buy” rating but lowering the price target from $47 to $44. This revision was due to emerging challenges in the company’s operating environment, which could potentially impact its earnings.
As of October 18, 2024, the consensus among analysts is a “Buy” rating, with a price target of $45, suggesting a potential upside of approximately 11.44% from the current stock price.
These adjustments in analyst ratings and price targets highlight the dynamic nature of market evaluations, influenced by both company-specific developments and broader economic factors.
Earnings Report Summary
Cass Information Systems recently shared its fourth-quarter 2024 earnings, giving investors a closer look at how the company has been performing. The results were a bit of a mixed bag, with some positives and a few challenges along the way.
Financial Performance
The company posted net income of $4.6 million for the quarter, which works out to $0.33 per share. That’s quite a drop from the same quarter last year when they reported $8.4 million in net income and $0.61 per share. However, looking at the bright side, this was a solid improvement from the third quarter of 2024, where earnings had dipped even further.
For the full year, Cass brought in $19.2 million in net income, or $1.39 per share. That’s down from $30.1 million and $2.18 per share in the previous year, showing that the company has faced some headwinds.
Operational Highlights
One positive takeaway was the improvement in the company’s net interest margin, which came in at 3.55%, up from 3.30% a year ago. The reason? Higher loan yields, which increased to 5.38% from 4.95%, thanks to loan growth and higher interest rates.
Transaction volumes were a bit of a mixed story. Facility expense transactions jumped 20.3%, helped by new client sign-ups. But on the flip side, transportation dollar volumes slipped 0.6% to $9.0 billion, mainly due to smaller transaction sizes.
Strategic Moves
Cass also made some strategic changes during the quarter. The company officially terminated its defined benefit pension plan, which resulted in a one-time expense of $3.5 million but should save about $1 million a year in costs going forward.
On the expansion front, Cass completed its acquisition of AcuAudit, a move that strengthens its transportation payment solutions. This fits into the company’s long-term goal of broadening its service offerings and boosting operational efficiency.
Despite some challenges, credit quality remained strong, with zero non-performing loans or charge-offs. Cass also repurchased 79,713 shares at an average price of $44.02, showing confidence in its own stock.
Looking Ahead
CEO Martin Resch expressed optimism about the company’s direction, noting that Cass made progress in 2024 and expects profitability to improve in 2025. While challenges remain, management seems focused on long-term growth and financial stability. Investors will be watching to see if the company can build on this momentum in the coming quarters.
Financial Health and Stability
Dividend investors know that a company’s balance sheet is just as important as its yield. Cass has some positive financial markers but also a few areas of concern.
- Total Cash: $349.73M
- Total Debt: $7.43M
- Debt-to-Equity Ratio: 3.24%
- Return on Equity (ROE): 8.35%
- Return on Assets (ROA): 1.14%
The company has a strong cash position with nearly $350 million in cash, which is a major advantage. It also carries very little debt, with a debt-to-equity ratio of only 3.24%, meaning it’s not relying on borrowed money to stay afloat.
However, profitability metrics aren’t as impressive. The company’s return on assets (1.14%) and return on equity (8.35%) suggest it’s not generating high returns compared to its industry peers. The profit margin of 8.72% and operating margin of 18.84% are respectable, but not outstanding.
From a balance sheet perspective, Cass is in a stable position, but its ability to generate strong earnings is under pressure.
Valuation and Stock Performance
At a glance, Cass looks a little expensive based on traditional valuation metrics. The price-to-earnings (P/E) ratio is 31.21, which is high relative to many dividend-paying stocks. While financial services firms often trade at a premium, this valuation suggests that investors may be paying up for Cass despite its recent earnings decline.
Other valuation figures include:
- Price-to-Book (P/B): 2.56
- Price-to-Sales (P/S): 3.14
In terms of stock performance, Cass has been trading between $37.99 and $49.16 over the past year. With a 200-day moving average of $42.13, the stock has been hovering around fair value based on recent trends.
A beta of 0.69 means the stock is less volatile than the broader market, which makes it attractive to conservative investors who prioritize stability. However, the quarterly revenue decline of -0.20% and earnings drop of -45.40% suggest that the company’s fundamentals aren’t currently supporting growth.
Risks and Considerations
Like any investment, Cass comes with a few risks that dividend investors should consider:
⚠️ Earnings Pressure – The company’s earnings have declined 45.4% year-over-year, which raises concerns about its ability to sustain dividends long-term.
⚠️ High Payout Ratio – With 87% of earnings going to dividends, there’s little room for dividend growth unless profitability improves.
⚠️ Cash Flow Struggles – The negative levered free cash flow (-$103.72M) suggests that dividends may be funded through reserves rather than organic earnings.
⚠️ Limited Growth Prospects – With a P/E of 31.21, the stock is trading at a premium despite declining earnings, which could limit future upside.
While these risks don’t necessarily make Cass a bad investment, they do mean that investors should watch its financial performance closely.
Final Thoughts
Cass Information Systems offers a steady but modest dividend with a relatively low-risk profile. Its strong cash reserves and minimal debt are positives, but the high payout ratio and declining earnings raise questions about future dividend growth.
For income investors who prioritize stability over high yields, Cass may still be worth considering. However, with limited earnings growth and cash flow challenges, its ability to continue raising dividends could be constrained unless business conditions improve.
At the end of the day, Cass fits the mold of a steady but unspectacular dividend payer—dependable, but not necessarily a growth engine for passive income seekers.
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