Absolute Software (TSE:ABST) Has Affirmed Its Dividend Of $0.08

Absolute Software Corporation's (TSE:ABST) investors are due to receive a payment of $0.08 per share on 25th of November. Based on this payment, the dividend yield on the company's stock will be 2.3%, which is an attractive boost to shareholder returns.

Check out the opportunities and risks within the CA Software industry.

Absolute Software Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. While Absolute Software is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Analysts are expecting EPS to grow by 99.2% over the next 12 months. We like to see the company moving towards profitability, but this probably won't be enough for it to post positive net income this year. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

Absolute Software Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the annual payment back then was $0.194, compared to the most recent full-year payment of $0.233. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Absolute Software's EPS has declined at around 21% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Absolute Software (of which 1 is a bit concerning!) you should know about. 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.