Amdocs (NASDAQ:DOX) Is Increasing Its Dividend To $0.435

Amdocs Limited (NASDAQ:DOX) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of April to $0.435. This makes the dividend yield 1.9%, which is above the industry average.

View our latest analysis for Amdocs

Amdocs' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Amdocs' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 41.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Amdocs Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.52 in 2013 to the most recent total annual payment of $1.74. This means that it has been growing its distributions at 13% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Amdocs has impressed us by growing EPS at 7.6% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Amdocs Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 Amdocs analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Amdocs 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.