CSG Systems International, Inc. (NASDAQ:CSGS) Is About To Go Ex-Dividend, And It Pays A 2.0% Yield

CSG Systems International, Inc. (NASDAQ:CSGS) stock is about to trade ex-dividend in three days. You will need to purchase shares before the 19th of March to receive the dividend, which will be paid on the 30th of March.

CSG Systems International's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Last year's total dividend payments show that CSG Systems International has a trailing yield of 2.0% on the current share price of $48.83. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for CSG Systems International

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. CSG Systems International paid out 51% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about CSG Systems International's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, CSG Systems International has lifted its dividend by approximately 6.6% a year on average.

The Bottom Line

Has CSG Systems International got what it takes to maintain its dividend payments? The payout ratios appear reasonably conservative, which implies the dividend may be somewhat sustainable. Still, with earnings basically flat, CSG Systems International doesn't stand out from a dividend perspective. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into CSG Systems International, it's worth knowing the risks this business faces. For example, we've found 3 warning signs for CSG Systems International that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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