American Software (NASDAQ:AMSW.A) Is Paying Out A Dividend Of $0.11
American Software, Inc. (NASDAQ:AMSW.A) will pay a dividend of $0.11 on the 25th of August. Based on this payment, the dividend yield on the company's stock will be 4.1%, which is an attractive boost to shareholder returns.
See our latest analysis for American Software
American Software Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, American Software was paying out 143% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.
Earnings per share is forecast to rise by 8.8% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 137%, which is a bit high and could start applying pressure to the balance sheet.
American Software Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.36, compared to the most recent full-year payment of $0.44. This means that it has been growing its distributions at 2.0% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth May Be Hard To Come By
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. It's not great to see that American Software's earnings per share has fallen at approximately 5.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
The Dividend Could Prove To Be Unreliable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think American Software is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for American Software 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.
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