Enghouse Systems (TSE:ENGH) Is Increasing Its Dividend To CA$0.26

Enghouse Systems Limited (TSE:ENGH) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of May to CA$0.26. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Enghouse Systems

Enghouse Systems' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Enghouse Systems' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 8.9%. If the dividend continues on this path, the payout ratio could be 74% by next year, which we think can be pretty sustainable going forward.

Enghouse Systems Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from CA$0.16 total annually to CA$1.04. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Enghouse Systems May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Enghouse Systems' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Enghouse Systems Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Enghouse Systems is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Enghouse Systems analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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