Temenos (VTX:TEMN) Is Paying Out A Larger Dividend Than Last Year

Temenos AG (VTX:TEMN) will increase its dividend from last year's comparable payment on the 19th of May to $1.30. This will take the dividend yield to an attractive 1.8%, providing a nice boost to shareholder returns.

We've discovered 1 warning sign about Temenos. View them for free.

Temenos' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Temenos' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 19.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Temenos

Temenos Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.424 in 2015, and the most recent fiscal year payment was $1.44. This implies that the company grew its distributions at a yearly rate of about 13% 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.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Temenos' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Temenos' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Temenos that you should be aware of before investing. Is Temenos not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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