Progress Software (NASDAQ:PRGS) Has Announced A Dividend Of $0.175

The board of Progress Software Corporation (NASDAQ:PRGS) has announced that it will pay a dividend of $0.175 per share on the 15th of September. Based on this payment, the dividend yield on the company's stock will be 1.2%, which is an attractive boost to shareholder returns.

View our latest analysis for Progress Software

Progress Software's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Progress Software's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 41.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Progress Software Is Still Building Its Track Record

It is great to see that Progress Software has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from $0.50 total annually to $0.70. This means that it has been growing its distributions at 4.9% per annum over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Progress Software has seen EPS rising for the last five years, at 10% per annum. Progress Software definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Progress Software's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Progress Software that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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