AudioCodes' (NASDAQ:AUDC) Shareholders Will Receive A Bigger Dividend Than Last Year

AudioCodes Ltd. (NASDAQ:AUDC) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of August to $0.18. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

Check out our latest analysis for AudioCodes

AudioCodes' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, AudioCodes was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 12.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

AudioCodes Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was $0.20 in 2018, and the most recent fiscal year payment was $0.36. This means that it has been growing its distributions at 16% per annum over that time. 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that AudioCodes has grown earnings per share at 12% 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.

AudioCodes Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for AudioCodes that you should be aware of before investing. Is AudioCodes not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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