In This Article:
Enghouse Systems Limited (TSE:ENGH) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of May to CA$0.30. This takes the dividend yield to 5.0%, which shareholders will be pleased with.
Enghouse Systems' Projected Earnings Seem Likely To Cover Future Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 70% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
The next year is set to see EPS grow by 9.2%. If the dividend continues on this path, the payout ratio could be 74% by next year, which we think can be pretty sustainable going forward.
View our latest analysis for Enghouse Systems
Enghouse Systems Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was CA$0.20, compared to the most recent full-year payment of CA$1.20. This means that it has been growing its distributions at 20% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 3.2% per annum over the last five years, which admittedly is a bit slow. Slow growth and a high payout ratio could mean that Enghouse Systems has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.
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 easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Enghouse Systems for free with public analyst estimates for the company. Is Enghouse Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.