Paycom Software, Inc. (NYSE:PAYC) will pay a dividend of $0.375 on June 10. Based on this payout, the dividend yield is 0.8%, which is a bit low compared to other companies in the sector.
Check out our latest analysis for Paycom Software
Paycom Software’s revenues easily cover benefits
Even a low dividend yield can be attractive if it lasts for years. However, before this announcement, Paycom Software’s dividend was more than covered by both cash flow and earnings. As a result, much of what it earned was reinvested into the company.
Looking ahead, earnings per share are expected to increase by 7.7% in the coming year. If the dividend continues to follow recent trends, we estimate the payout ratio will be 17%, which is within the range that reassures us about the sustainability of the dividend.
Paycom Software is still building its track record
It’s difficult to judge how stable a dividend is when the company hasn’t paid one in a very long time. This doesn’t mean the company can’t pay a good dividend, just that we want to wait until it can prove itself.
The dividend seems likely to grow
The company’s investors will be happy that they have been receiving dividend income for some time. Paycom Software has impressed us by growing earnings per share at 27% per year over the past five years. Earnings per share are growing robustly and the payout ratio is low, which we think is an ideal combination in a dividend stock as the company can quite easily increase the dividend in the future.
We are very happy with the Dividend from Paycom Software
Overall, we’d like to see the dividend remain consistent, and we think Paycom Software could even increase payments in the future. The profits easily cover the payouts and the company generates a lot of cash. Taking all this into account, this appears to be a good dividend opportunity.
Investors generally prefer companies with a consistent, stable dividend policy over companies with an irregular dividend policy. Still, investors should consider a host of other factors besides dividend payments when analyzing a company. Earnings growth generally bodes well for the future value of corporate dividend payments. See if the 20 Paycom Software analysts we track predict continued growth with our free reporting on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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