Absolute Software (TSE:ABST) Is Paying Out A Dividend Of $0.08

Absolute Software Corporation (TSE:ABST) will pay a dividend of $0.08 on the 24th of May. The dividend yield will be 2.9% based on this payment which is still above the industry average.

While the dividend yield is important for investors’ income, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Absolute Software’s stock price has been reduced by 31% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for Absolute Software

Absolute Software’s Distributions May Be Difficult To Sustain

If the payments aren’t sustainable, a high yield for a few years won’t matter that much. While Absolute Software is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. In general, cash flows are more important than the more traditional measures of profit, so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to rise by 87.6%. While it is good to see income moving in the right direction, it still looks like the company won’t achieve profitability. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.

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historic-dividend

Absolute Software Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.194 in 2013 to the most recent total annual payment of $0.231. This implies that the company grew its distributions at a yearly rate of about 1.8% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren’t as good as they seem. Absolute Software’s earnings per share has shrunk at 49% a year over the past five years. A sharp decline in earnings per share is not great from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Absolute Software’s Dividend

Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. The company has been bringing in plenty of cash to cover the dividend, but we don’t necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be aware of before pouring capital into a stock. For example, we’ve identified 5 warning signs for Absolute Software (1 is concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try ours collection of strong dividend payers.

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.

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