Compucom Software (NSE: COMPUSOFT) reaffirmed its dividend of 0.30
The advice of Compucom Software Limited (NSE: COMPUSOFT) announced that it will pay a dividend of 0.30 yen per share on October 15. Based on this payment, the dividend yield on the shares of the company will be 2.2%, which is an attractive increase in returns for shareholders.
While dividend yield is important for income investors, it is also important to take into account any significant change in the price of the shares, as this will generally outweigh any gains from distributions. Investors will be delighted to see that the Compucom Software share price has risen 34% in the past 3 months, which is good for shareholders and may also explain a drop in dividend yield.
See our latest review for Compucom Software
Compucom Software’s revenues easily cover distributions
If the payments are not sustainable, a high return for a few years will not matter much. Based on the last payment, Compucom Software was earning comfortably enough to cover the dividend. This indicates that a fairly large proportion of the profits are reinvested in the business.
EPS is expected to fall 8.3% over the next 12 months if recent trends continue. If the dividend continues on the same path it has been recently, we estimate that the payout ratio could be 64%, which is entirely possible to continue.
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. Payments haven’t really changed in 10 years. We are happy to see that the dividend has increased, but with a limited growth rate and fluctuations in payments, the total shareholder return may be limited.
Dividend growth is questionable
With a relatively volatile dividend, it is even more important to see if earnings per share increase. Over the past five years, Compucom Software’s earnings per share have declined by approximately 8.3% per year. If profits continue to fall, the company may have to make the difficult choice of reducing the dividend or even stopping it altogether – the opposite of dividend growth.
Overall, we don’t think this company is generating a good stock of dividends, even though the dividend has not been reduced this year. Payments haven’t been particularly stable and we don’t see huge growth potential, but with the dividend well covered by cash flow, it could prove to be reliable in the short term. This company is not in the top bracket of income providing stocks.
Companies with a stable dividend policy are likely to benefit from greater investor interest than those with a more inconsistent approach. However, there are other things for investors to consider when analyzing the performance of stocks. As an example, we have met 5 warning signs for Compucom software you must be aware of this, and one of them must not be ignored. If you are a dividend investor, you can also check out our curated list of high performing dividend stocks.
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