Enghouse Systems Ltd.

I do not own this stock of Enghouse Systems Ltd. (TSX-ESL, OTC- EGHSF). This stock has been recommended by Keystone Financial Publishing as a good Small Cap tech stock with dividend.

This company started to pay dividends in 2008. The dividends can be quite low, but the growth is very good. The current dividend yield is 1.03% and the 5 year median dividend yield is 1.74%. The dividend growth is at 26.8% and 23.8% per year over the past 5 and 6 years.

With low dividends, you generally get low Dividend Payout Ratios. This is true in this case. The 5 year median DPR for EPS is 31.5% and for CFPS is 16.6%. The DPRs for the year ending October 2014 is at 32.4% for EPS and 18.7% for CFPS.

I color code my growth value on my spreadsheet. Red is for low or negative growth. Blue is for moderate growth and green is for good growth. Looking at this spreadsheet, all I can see is green. For example the revenue per share has grown by 21.7% and 13.5% per year over the past 5 and 10 years. The EPS has grown by 32.7% and 10% per year over the past 5 and 10 years.

Shareholders have done well. The 5 and 10 year total return is at 37.39% and 17.97% per year. The portion of this return from dividends is at 1.82% and 0.84% per year over the past 5 and 10 years. The portion of this return from capital gain is at 35.57% and 17.13% per year over the past 5 and 10 years.

The debt ratios on this stock are good. However, the Liquidity Ratio has been dropping. It used to be very high, but for the 2014 financial year it is just a good normal number. For example, 5 years ago the Liquidity Ratio was 3.25 and for 2014 it is 1.50. Even last year it was 1.68.

The Debt Ratio for 2014 is very good at 2.74. This also has been dropping and 5 years ago it was 3.58. Leverage and Debt/Equity Ratios are good and they have always been good. The current ratios are 1.57 and 0.57 respectively.

Return on Equity over the past 5 years has been below 10% once and that was in 2010. The ROE was below 10% between 2005 and 2010 inclusive. So this company has been doing better since 2011.

Sound bite for Twitter and StockTwits is: Dividend growth tech stock. If you are going to buy tech stocks, I think that the first ones you should look at are those with dividends, like this company. See my spreadsheet at esl.htm.

This is the first of two parts. The second part will be posted on Wednesday, January 21, 2015 and will be available here. The first part talks about the stock and the second part talks about the stock price.

Enghouse Systems Limited is a global provider of enterprise software solutions serving a variety of distinct vertical markets. Its strategy is to build a large diverse enterprise software company through strategic acquisitions and managed growth. Its web site is here Enghouse.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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