FazzNoth Posted February 21, 2022 Share Posted February 21, 2022 The board of American Software, Inc. (NASDAQ:AMSW.A) has announced that it will pay a dividend of US$0.11 per share on the 20th of May. The dividend yield will be 2.2% 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 85% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business. EPS is set to fall by 17.1% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 155%, which is definitely a bit high to be sustainable going forward. American Software Has A Solid Track Record The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.36 in 2012, and the most recent fiscal year payment was US$0.44. This means that it has been growing its distributions at 2.0% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted. American Software May Have Challenges Growing The Dividend Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. American Software has seen EPS rising for the last five years, at 5.7% per annum. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future. 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. 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 be a touch cautious of relying on this stock primarily for the dividend income. 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. For instance, we've picked out 4 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. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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. https://finance.yahoo.com/news/american-softwares-nasdaq-amsw-dividend-090920743.html Link to comment Share on other sites More sharing options...
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