Yahoo Finance American Software (NASDAQ:AMSW.A) Has Affirmed Its Dividend Of $0.11
American Software, Inc. (NASDAQ:AMSW.A) has announced that it will pay a dividend of $0.11 per share on the 30th of August. Based on this payment, the dividend yield on the company's stock will be 5.0%, 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
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 153% of what it was earning and 90% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.
Over the next year, EPS is forecast to fall by 3.5%. If the dividend continues along recent trends, we estimate the payout ratio could reach 161%, which could put the dividend in jeopardy if the company's earnings don't improve.
American Software Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.44. Its dividends have grown at less than 1% per annum over this time frame. 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.
There Isn't Much Room To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. American Software has impressed us by growing EPS at 5.8% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.
American Software's Dividend Doesn't Look Sustainable
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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.
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. For instance, we've picked out 2 warning signs for American Software that investors should take into consideration. 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.
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