Sylogist Ltd. (TSE:SYZ) has announced that it will pay a dividend of CA$0.13 per share on the 15th of December. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.
See our latest analysis for Sylogist
Sylogist Is Paying Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Over the next year, EPS is forecast to fall by 20.0%. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was CA$0.08 in 2011, and the most recent fiscal year payment was CA$0.50. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Sylogist has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Sylogist May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Sylogist's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
We're Not Big Fans Of Sylogist's Dividend
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Sylogist make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.
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. Just as an example, we've come across 2 warning signs for Sylogist you should be aware of, and 1 of them doesn't sit too well with us. We have also put together a list of global stocks with a solid dividend.
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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.
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About TSX:SYZ
Sylogist
A software company, provides mission-critical software-as-a-service solutions in Canada, the United States, and the United Kingdom.
Undervalued with moderate growth potential.
