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 on the 17th of May, with investors receiving $0.11 per share. This makes the dividend yield 3.9%, which will augment investor returns quite nicely.
View our latest analysis for American Software
American Software Doesn't Earn Enough To Cover Its Payments
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the dividend made up 78% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.
Over the next year, EPS is forecast to fall by 30.0%. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.
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 dividend has gone from $0.40 total annually to $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
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that American Software has been growing its earnings per share at 10.0% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
Our Thoughts On American Software's Dividend
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. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for American Software (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
