American Software (NASDAQ:AMSW.A) Has Affirmed Its Dividend Of $0.11
The board of American Software, Inc. (NASDAQ:AMSW.A) has announced that it will pay a dividend of $0.11 per share on the 16th of February. The dividend yield will be 4.5% based on this payment which is still above the industry average.
Check out our latest analysis for American Software
American Software Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 87% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.
Looking forward, earnings per share is forecast to fall by 2.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 164%, which could put the dividend under pressure if earnings don't start to improve.
American Software Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.40 total annually to $0.44. Dividend payments have grown at less than 1% a year over this period. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. American Software hasn't seen much change in its earnings per share over the last five years.
American Software's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for American Software (1 is potentially serious!) that you should be aware of before investing. 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.
