Progress Software (NASDAQ:PRGS) Is Paying Out A Dividend Of $0.175

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editorial-team@simplywallst.com (Simply Wall St)

Sat, Sep 30, 2023, 6:07 AM 2 min read

Progress Software's 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, prior to this announcement, Progress Software's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 76.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

historic-dividend — NasdaqGS:PRGS Historic Dividend September 30th 2023

Progress Software Doesn't Have A Long Payment History

It is great to see that Progress Software has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the annual payment back then was $0.50, compared to the most recent full-year payment of $0.70. This means that it has been growing its distributions at 4.9% per annum over that time. Progress Software hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Progress Software Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Progress Software has been growing its earnings per share at 7.8% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, a consistent dividend is a good thing, and we think that Progress Software has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For example, we've picked out 1 warning sign for Progress Software that investors should know about before committing capital to this stock. Is Progress Software 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.