Yahoo Finance Temenos' (VTX:TEMN) Upcoming Dividend Will Be Larger Than Last Year's
The board of Temenos AG (VTX:TEMN) has announced that it will be paying its dividend of $1.20 on the 14th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 1.8%, which shareholders will be pleased with.
View our latest analysis for Temenos
Temenos' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Temenos was paying out 76% of earnings, but a comparatively small 40% of free cash flows. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 71.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Temenos Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was $0.392, compared to the most recent full-year payment of $1.36. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
Dividend Growth Is Doubtful
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Temenos' earnings per share has fallen at approximately 5.1% 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.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Temenos' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Temenos you should be aware of, and 1 of them can't be ignored. 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.
