Enghouse Systems' (TSE:ENGH) Upcoming Dividend Will Be Larger Than Last Year's

Enghouse Systems Limited's (TSE:ENGH) dividend will be increasing to CA$0.18 on 31st of May. This will take the annual payment to 1.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Enghouse Systems

Enghouse Systems' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Enghouse Systems was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 2.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 47%, which is comfortable for the company to continue in the future.

Enghouse Systems Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was CA$0.10 in 2012, and the most recent fiscal year payment was CA$0.74. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Enghouse Systems has grown earnings per share at 12% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Enghouse Systems' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Enghouse Systems that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.