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Amdocs (NASDAQ:DOX) Is Increasing Its Dividend To US$0.40

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Amdocs Limited (NASDAQ:DOX) has announced that it will be increasing its dividend on the 29th of April to US$0.40. This will take the dividend yield to an attractive 1.9%, providing a nice boost to shareholder returns.

Check out our latest analysis for Amdocs

Amdocs' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Amdocs' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 14.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

Amdocs Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the first annual payment was US$0.52, compared to the most recent full-year payment of US$1.58. This implies that the company grew its distributions at a yearly rate of about 12% 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.

Amdocs Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Amdocs has seen EPS rising for the last five years, at 8.9% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Amdocs' prospects of growing its dividend payments in the future.

Amdocs Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Amdocs for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.

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.