AudioCodes' (NASDAQ:AUDC) Dividend Will Be $0.18

The board of AudioCodes Ltd. (NASDAQ:AUDC) has announced that it will pay a dividend on the 6th of March, with investors receiving $0.18 per share. This means that the annual payment will be 3.0% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that AudioCodes' stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for AudioCodes

AudioCodes' Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, AudioCodes was paying out quite a large proportion of both earnings and cash flow, with the dividend being 99% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS could expand by 30.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

AudioCodes Doesn't Have A Long Payment History

It is great to see that AudioCodes has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.20 in 2018 to the most recent total annual payment of $0.36. This means that it has been growing its distributions at 8.8% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider AudioCodes to be a consistent dividend paying stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. AudioCodes has impressed us by growing EPS at 30% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which AudioCodes hasn't been doing.

Our Thoughts On AudioCodes' 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. While AudioCodes is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for AudioCodes 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.