American Software (NASDAQ:AMSW.A) Has Announced A Dividend Of $0.11

The board of American Software, Inc. (NASDAQ:AMSW.A) has announced that it will pay a dividend of $0.11 per share on the 1st of December. Based on this payment, the dividend yield on the company's stock will be 3.7%, which is an attractive boost to shareholder returns.

Check out our latest analysis for American Software

American Software 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. Prior to this announcement, the company was paying out 135% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 7.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 131%, which probably can't continue without putting some pressure on the balance sheet.

American Software Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.40 in 2013 to the most recent total annual payment of $0.44. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

American Software May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. Unfortunately, American Software's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

American Software's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 2 warning signs for American Software 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.