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Enghouse Systems Limited (TSE:ENGH) will increase its dividend on the 31st of May to CA$0.18. This makes the dividend yield 1.8%, which is above the industry average.
See our latest analysis for Enghouse Systems
Enghouse Systems' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Enghouse Systems' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 6.4%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 49%, which is comfortable for the company to continue in the future.
Enghouse Systems Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from CA$0.10 in 2012 to the most recent annual payment of CA$0.74. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Enghouse Systems has been growing its earnings per share at 12% a year over the past five years. Enghouse Systems definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Enghouse Systems Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Enghouse Systems is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Enghouse Systems that investors should take into consideration. Is Enghouse Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.