Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see CSG Systems International, Inc. (NASDAQ:CSGS) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 12th of September will not receive the dividend, which will be paid on the 27th of September.
CSG Systems International’s next dividend payment will be US$0.22 per share, and in the last 12 months, the company paid a total of US$0.89 per share. Based on the last year’s worth of payments, CSG Systems International stock has a trailing yield of around 1.7% on the current share price of $53.68. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether CSG Systems International has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for CSG Systems International
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. CSG Systems International paid out a comfortable 37% of its profit last year. A useful secondary check can be to evaluate whether CSG Systems International generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.
It’s positive to see that CSG Systems International’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, CSG Systems International’s earnings per share have been growing at 11% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination – plus the dividend can always be increased later.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, six years ago, CSG Systems International has lifted its dividend by approximately 6.8% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Has CSG Systems International got what it takes to maintain its dividend payments? We love that CSG Systems International is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. CSG Systems International looks solid on this analysis overall, and we’d definitely consider investigating it more closely.
Curious what other investors think of CSG Systems International? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.