Progress Software Corporation (NASDAQ:PRGS) will pay a dividend of $0.175 on September 16th. The dividend yield will be 1.3% based on this payment, which is still above the industry average.
See our latest analysis for Progress Software
Progress Software’s profits more than cover the distributions
While it’s great to have a strong dividend yield, we should also consider whether the payout is sustainable. Based on the last payment, Progress Software earned a reasonable amount to cover the dividend. This suggests that a large portion of profits are being reinvested in the business, with the aim of fueling growth.
The EPS is expected to grow by 77.6% in the coming year. If the dividend continues on this path, the payout ratio could be 25% next year, which we think could be quite sustainable going forward.
Progress Software continues to build its track record
It’s great to see that Progress Software has been paying a stable dividend for a number of years, but we want to be a little cautious about whether this will remain the case over a full economic cycle. The annual payment for the past 8 years was $0.50 in 2016, and the most recent payment in the fiscal year was $0.70. This equates to a compound annual growth rate (CAGR) of approximately 4.3% per year over that period. It’s good to see at least some dividend growth. But given the relatively short history of dividend payments, we don’t want to be overly dependent on this dividend.
The dividend seems likely to grow
Investors might be attracted to the stock based on the quality of its payment history. Progress Software has grown its earnings per share over the past five years, at 13% per year. The company pays out a fair amount of profit to shareholders and is growing earnings at a decent rate, so we think it could be a decent dividend stock.
We are very pleased with the Dividend from Progress Software
Overall, we think this is a great income investment, and we think maintaining the dividend this year was a conservative choice. The company easily earns enough to cover its dividend payments, and it’s great to see that income translating into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies with a stable dividend policy are likely to enjoy greater investor interest than companies that suffer from a more inconsistent approach. At the same time, there are other factors that our readers should be aware of before putting capital into stocks. As an example we have identified 2 warning signs for Progress Software what you should be aware of before investing. Is Progress Software not quite the opportunity you were looking for? Then take a look at our selection of top dividend stocks.
Do you have feedback on this article? Are you concerned about the content? Contact Us directly with us. You can also email the editorial team (at) simplywallst.com.
This article from Simply Wall St is general in nature. We comment solely on historical data and analyst forecasts, using an objective methodology. Our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or financial situation. We aim to provide you with a long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in the shares mentioned.
Do you have feedback on this article? Are you concerned about the content? Please contact us immediately. You can also send an email to [email protected]