Sonata Software (NSE:SONATSOFTW) Has Announced A Dividend Of ₹7.00

Sonata Software Limited (NSE:SONATSOFTW) has announced that it will pay a dividend of ₹7.00 per share on the 24th of November. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Sonata Software

Sonata Software's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite easily covered by Sonata Software's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 103.5% over the next year. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty 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 annual payment during the last 10 years was ₹0.563 in 2013, and the most recent fiscal year payment was ₹15.75. This works out to be a compound annual growth rate (CAGR) of approximately 40% a year over that time. Sonata Software 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Sonata Software has seen EPS rising for the last five years, at 16% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Sonata Software Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Sonata Software might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Sonata Software that investors should know about before committing capital to this stock. Is Sonata Software not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.