MIND C.T.I's (NASDAQ:MNDO) Dividend Will Be US$0.26

MIND C.T.I. Ltd (NASDAQ:MNDO) will pay a dividend of US$0.26 on the 6th of April. This makes the dividend yield 8.7%, which will augment investor returns quite nicely.

Check out our latest analysis for MIND C.T.I

MIND C.T.I's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up a very large portion of earnings and also represented 76% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

Over the next year, EPS could expand by 6.4% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

MIND C.T.I 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 US$0.24 in 2012 to the most recent annual payment of US$0.26. Dividend payments have grown at less than 1% a year over this period. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

MIND C.T.I Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. MIND C.T.I has seen EPS rising for the last five years, at 6.4% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On MIND C.T.I's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think MIND C.T.I is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for MIND C.T.I that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.