Last update on 2024-06-27

CSG Systems (CSGS) - Dividend Analysis (Final Score: 6/8)

Analyze the dividend performance and stability of CSG Systems (CSGS) with an 8-criteria scoring system. Final Score: 6/8.

Short Analysis - Dividend Score: 6

We're running CSG Systems (CSGS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

CSG Systems (CSGS) has a mixed but generally positive performance based on an 8-criteria scoring system for dividend policy. They have an impressive dividend yield higher than the industry average and have shown consistent stock repurchases, which are favorable for investors. However, their average annual dividend growth rate is below 5%, and there were inconsistencies in dividend stability with some fluctuations. While the dividends started fairly recently (2011), they are well covered by earnings and cash flows, reflecting financial stability. The company has not paid dividends for over 25 years, which may concern some investors.

Insights for Value Investors Seeking Stable Income

CSG Systems (CSGS) appears to be a good option for investors who are focused on income through dividends, given its higher-than-average dividend yield and reliable stock repurchase program. However, those looking for consistent long-term growth in dividends might find the fluctuating dividend growth rate and shorter history of dividend payments a concerning factor. Overall, it is worth considering if you prioritize a strong current yield and stock repurchase activities.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the income return that a shareholder receives from owning a stock, expressed as a percentage of the current price. It is an important metric for income-focused investors as it highlights how much cash flow they would receive relative to their investment amount. A higher yield may indicate an attractive investment, particularly if it is consistently maintained.

Over the last 20 years, CSG Systems (CSGS) demonstrates an impressive dividend yield trend when compared to the industry average. Given that CSGS's current dividend yield is 2.1049%, which is significantly higher than the industry average of 0.4%, CSGS has evidently become a more attractive proposition for income-oriented investors. Particularly from 2013 onwards, the company's dividend yield has consistently been above 1.5%, peaking at 2.644% in 2018, indicating a robust ability to return capital to shareholders. Further insight into stock prices reveals a general upward trend over the last two decades. From a low of $12.49 in 2003 to closing at $53.21 in 2023, the stock has seen considerable growth. The noteworthy increase in dividends per share, from $0 in 2003 to $1.12 in 2023, underscores the company's improved profitability and shareholder distribution. This positive long-term trajectory, evidenced by a steadily increasing dividend yield that exceeds industry averages, highlights CSGS's strong position in generating and returning value to its shareholders. Therefore, CSG Systems' higher dividend yield trend is unequivocally positive, reflecting its capacity for consistent income distribution, despite fluctuations in broader market conditions.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures how much a company's dividend has increased over time. A rate higher than 5% indicates strong, consistent growth and attractiveness for long-term investors.

The Dividend Growth Rate for CSG Systems (CSGS) in the last 20 years does not appear to be consistently higher than 5%. While the dividend per share ratio has significant variations, the average dividend ratio stands at approximately 4.98%. Despite some years exhibiting remarkable growth—such as in 2021 with 32.9787%—others, such as 2022, show negative growth (-15.2%). This overall fluctuation coupled with an average below 5% suggests inconsistency, making it less attractive for dividends-focused long-term investors looking for consistent growth.

Average annual Payout Ratio lower than 65% in the last 20 years?

Explain the criterion for CSG Systems (CSGS) and why it is important to consider

A Payout Ratio is the percentage of earnings a company pays to its shareholders in the form of dividends. The criterion of maintaining an average payout ratio lower than 65% over 20 years suggests that a company has a prudent approach to profit distribution, ensuring that it retains sufficient earnings to reinvest in its growth and operations.

Dividends Well Covered by Earnings?

dividends are well covered by the earnings

Dividends for CSG Systems have generally been well covered by earnings since they started issuing dividends in 2013. Earnings per share (EPS) have fluctuated but maintained an overall upward trajectory, allowing for increasing dividend payments. In 2023, for example, the EPS was 2.2128, which covered the 1.12 dividend per share by approximately 50.6%. This indicates that CSGS had enough earnings to comfortably cover its dividend payments. A coverage ratio of above 50% is generally seen as healthy, signaling financial stability. However, the trends show slight inconsistency, which could be a risk factor.

Dividends Well Covered by Cash Flow?

This criterion evaluates the extent to which a company’s dividend payments are supported by its free cash flow. Strong cash flow coverage signifies a higher probability of sustaining dividends, which is crucial for income-focused investors.

CSG Systems had a commendable trend in free cash flow from 2003 to 2023, which generally showed an increase with a few fluctuations. The free cash flow reached a low of $26.6M in 2022 but rebounded to $103.9M in 2023. Conversely, CSG Systems began its dividend payouts in 2013. Analyzing the data, the initial years showed robust coverage with ratios peaking at 1.258 in 2022, meaning free cash flow was more than sufficient to cover dividend payments. Currently, as of 2023, the cash flow completely covers the dividend payout with a ratio of 0.327. While there were years with decreased ratios, CSG Systems managed to maintain some level of coverage consistently, indicating resilience. Overall, this is a positive trend, assuring investors that their dividends are well-backed by the Company's operational cash flow.

Stable Dividends Since the Company Began Paying Dividends?

Assess whether CSG Systems has maintained stable dividends over the past two decades. Dividend stability is crucial for income-seeking investors because it demonstrates reliability and lessens the risk of income fluctuation.

Over the past 20 years, CSG Systems did not pay any dividends between 2003 to 2010. Starting from 2011, the company began distributing dividends. The values have been generally increasing except for a drop from $1.25 in 2021 to $1.06 in 2022, evidently more than 20%. This indicates a break in consistency that might concern income-focused investors.

Dividends Paid for Over 25 Years?

Explain the criterion for CSG Systems (CSGS) and why it is important to consider

Criterion 6 evaluates whether CSG Systems has paid dividends continuously for over 25 years. This is pertinent as it demonstrates the company's commitment to returning value to its shareholders, signifying financial stability and a reliable income stream for investors. A long history of dividend payments is often interpreted as a positive indicator of a company’s health and sustainability.

Reliable Stock Repurchases Over the Past 20 Years?

Discuss the importance of reliable stock repurchases and how they affect long-term investor value for CSG Systems (CSGS).

Reliable stock repurchases are a key metric for assessing a company's commitment to returning value to shareholders. Over the past 20 years, CSG Systems has consistently engaged in stock repurchases during 15 of those years, covering more than 70% of the period. For example, the number of shares has decreased from 51,432,000 in 2003 to 29,938,000 in 2023. This corresponds to an average repurchase rate of about -2.5438% per year. A consistent stock repurchase strategy can reduce the number of shares outstanding, thereby increasing earnings per share (EPS) and potentially boosting the stock price. The downward trend in shares outstanding is a positive indicator, suggesting effective capital allocation management aimed at enhancing shareholder value. This commitment is reflected in the substantial decrease in the number of shares, signaling the company’s focus on rewarding its investors. Overall, CSG System’s reliable stock repurchase program makes it an attractive option for long-term investors.