Yahoo Finance American Software (NASDAQ:AMSW.A) Has Affirmed Its Dividend Of $0.11
American Software, Inc.'s (NASDAQ:AMSW.A) investors are due to receive a payment of $0.11 per share on 30th of August. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.
View our latest analysis for American Software
American Software Is Paying Out More Than It Is Earning
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 153% of what it was earning and 90% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.
Over the next year, EPS is forecast to fall by 3.5%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 161%, which could put the dividend under pressure if earnings don't start to improve.
American Software Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.44. Dividend payments have been growing, but very slowly over the period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
There Isn't Much Room To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. American Software has impressed us by growing EPS at 5.8% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about American Software's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for American Software that investors should take into consideration. Is American 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.
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