When most income-driven investors seek out high-yielding securities, sectors such as the Mortgage REITs or individual stocks such as MLPs tend to stand out. That being said, there is always an exception to the norm, and in this case I'm looking at one high-yielding, inexpensive stock within the tech sector.
American Software, Inc. (AMSWA) currently has a P/E ratio of 19.08 and a forward yield of 5.49% ($0.40). On Wednesday, November 14th, the company announced an 11.1% increase in its quarterly dividend which will increase $0.01/share from a previous distribution $0.09/share to a new distribution of $0.010/share payable on December 21st to all shareholders on record as of December 8th.
According to Gino Verza, "AMWSA upgrades clients' operating processes by improving the effectiveness of day-to-day interaction with their customers (clients of clients) and supply chain stakeholders. This strengthens customer experience, reduces clients' operating assets, and shortens their cash conversion cycle". That said the company is up against the likes of JDA Software (JDAS), Manhattan Software (MANH) and Oracle (ORCL) within the software as a service (SAAS) space and I think investors should take a look at some of the recent developments at American Software, Inc.
When it comes to American Software, the dividend hike isn't the only catalyst long-term investors should consider. In fact I feel there are two ancillary variables to this regarding fundamentals potential shareholders should consider. The first ancillary variable to consider is the fact the stock is trading at a 10.90% discount to its current 50 DMA and 12.0% discount to its 200 DMA. The second ancillary variable to consider is the fact the company has surpassed earnings estimates by an average of 11.725% in three of the last four quarters.
In terms of recent developments potential investors need to take a closer look at some of the company's wholly-owned subsidiaries. The first subsidiary, NGC Software, recently announced that STEPS, Inc. and Valley Apparel have both upgraded to the latest version of NGC's Shop Floor Control software. The company's second subsidiary, Logility, Inc. recently announced key developments in terms of its Logility Voyager Solutions Proportional Profile Planning software. According to Mike Edenfield, CEO of Logility, "Voyager Proportional Profile Planning has been developed in cooperation with our customers and solves a pressing challenge many companies face today. Through this industry-first, we are helping companies free up resources, plan more accurately, reduce inventory and working capital, improve customer service, and gain a real competitive advantage."
Are there any potentially negative risks associated with an investment in American Software? Of course there are, and several for that matter. During the company's most recent quarter Software license fee revenues came in at $5.1 million, which represented a 24% decrease year-over-year. Secondly, operating earnings for the quarter were $3.7 million, an increase of 4% compared to the same period last year. If licensing revenue and operating earnings don't take a turn for the better, I'd be very cautious about the size of the position I was planning of establishing.