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

The board of Enghouse Systems Limited (TSE:ENGH) has announced that it will be paying its dividend of CA$0.30 on the 30th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 4.7%, which is above the industry average.

Check out our latest analysis for Enghouse Systems

Enghouse Systems' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 70% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 9.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

Enghouse Systems Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CA$0.20 in 2015 to the most recent total annual payment of CA$1.20. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 3.2% per annum over the last five years, which admittedly is a bit slow. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

We Really Like Enghouse Systems' Dividend

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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign for Enghouse Systems that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.