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Absolute Software (TSE:ABST) Will Pay A Dividend Of $0.08

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The board of Absolute Software Corporation (TSE:ABST) has announced that it will pay a dividend on the 26th of August, with investors receiving $0.08 per share. The dividend yield will be 2.6% based on this payment which is still above the industry average.

Check out our latest analysis for Absolute Software

Absolute Software's Distributions May Be Difficult To Sustain

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Absolute Software isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Analysts are expecting EPS to grow by 69.5% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

historic-dividend
historic-dividend

Absolute Software Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.194 in 2012, and the most recent fiscal year payment was $0.244. This means that it has been growing its distributions at 2.3% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Absolute Software's earnings per share has fallen at approximately 2.7% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Absolute Software is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Absolute Software (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.

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