CSG Systems International (NASDAQ:CSGS) Has Announced That It Will Be Increasing Its Dividend To $0.28
CSG Systems International, Inc. (NASDAQ:CSGS) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of March to $0.28. This will take the annual payment to 1.8% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for CSG Systems International
CSG Systems International's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, CSG Systems International's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 127% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.
Looking forward, earnings per share is forecast to rise by 171.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.
CSG Systems International Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.60 total annually to $1.12. This means that it has been growing its distributions at 6.4% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
CSG Systems International May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. CSG Systems International has seen earnings per share falling at 5.0% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In summary, while it's always good to see the dividend being raised, we don't think CSG Systems International's payments are rock solid. While CSG Systems International is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for CSG Systems International you should be aware of, and 1 of them doesn't sit too well with us. Is CSG Systems International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here