The board of Progress Software Corporation (NASDAQ:PRGS) has announced that it will pay a dividend of $0.175 per share on the 15th of June. This means the annual payment is 1.2% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Progress Software
Progress Software’s Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Before making this announcement, Progress Software was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 10.4%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.
Progress Software Is Still Building Its Track Record
It is great to see that Progress Software has been paying a stable dividend for a number of years now, but 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 $0.50 in 2017 to the most recent total annual payment of $0.70. This means that it has been growing its distributions at 5.8% per annum over that time. Progress Software has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. We are encouraged to see that Progress Software has grown earnings per share at 16% per year over the past five years. Progress Software definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Progress Software Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we’ve identified 1 warning sign for Progress Software that investors need to be conscious of moving forward. Is Progress Software 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.
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