AudioCodes (NASDAQ:AUDC) Has Affirmed Its Dividend Of $0.18

AudioCodes Ltd.'s (NASDAQ:AUDC) investors are due to receive a payment of $0.18 per share on 29th of August. This payment means that the dividend yield will be 3.4%, which is around the industry average.

Check out our latest analysis for AudioCodes

AudioCodes' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, AudioCodes was paying out quite a large proportion of both earnings and cash flow, with the dividend being 304% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to fall by 4.3% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 92% in the next 12 months which is on the higher end of the range we would say is sustainable.

AudioCodes Is Still Building Its Track Record

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. Since 2018, the dividend has gone from $0.20 total annually to $0.36. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. AudioCodes has seen earnings per share falling at 4.3% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about AudioCodes' payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for AudioCodes that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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