Looking for Income? This Underfollowed Small Cap Is a Dividend Star

Underappreciated small-cap technology company Sylogist Ltd. (TSXV:SYZ) has a seven-year dividend-growth streak and history of issuing special dividends.

| More on:
The Motley Fool

Dividend-growth investors tend to look at the larger, more stable dividend-growth companies. There are, however, some intriguing small caps that have proven to be very effective income distributors.

One such company is Sylogist (TSXV:SYZ). This little-known small cap is a technology innovation company that provides intellectual property solutions to a range of public and private sector customers. It is better defined as a software company that provides a range of enterprise resource planning solutions, including fund accounting, grant management, and payroll systems.

Some of its major customer groups include local governments, national governing organizations, and education boards. Sylogist has over 1,000 customers worldwide, the bulk of with are in North America and the U.K.

Impressive growth

Year to date, Sylogist has been a top performer. Its share price has risen approximately 26%, far outpacing the broader market. Over the past five years, the company’s stock price has averaged a 17% return.

The company is what one would call a high-growth stock. Sylogist has grown revenues by a compound annual growth rate (CAGR) of 35% over the past five years. Earnings per share (EPS) have been significantly more volatile, but it’s important to note that EPS are impacted by one-time items.

Given that Sylogist has a growth-through-acquisition mentality, EPS is often impacted by acquisition costs. Despite the volatility, EPS have grown by a CAGR of 26% since 2012. What happens if the company can’t find any attractive companies to acquire? This brings me to the company’s capital-allocation policy.

Capital allocation

Sylogist is a Canadian Dividend Aristocrat, having raised dividends for seven consecutive years. Over the course of this time frame, the company has averaged a dividend-growth rate of approximately 16%. As a result, shareholders would have seen their dividends double in fewer than five years.

That is just the regular quarterly dividend. Since 2015, the company has also issued a special dividend on four separate occasions. In total, the company distributed an additional $0.27 per share in special dividends. This is equal to almost a year’s worth of monthly dividends at today’s quarterly payout of $0.08 per share.

Over the past three years, the company has announced its special dividend in late fall. Given its record results thus far in 2018, another special dividend may be in the cards.

Sylogist is extremely shareholder friendly. If it can’t find something to invest in, it will either buy back shares or issue special dividends to shareholders. This little-known tech star is an attractive investment for income-seeking investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Mat Litalien has no position in any of the companies listed. Sylogist is a recommendation of Dividend Investor Canada.

More on Dividend Stocks

Canadian energy stocks are rising with oil prices
Dividend Stocks

3 Low-Volatility Stocks for Cautious Investors

As uncertainty grips the market, here are three low-volatility stocks you can buy and hold with confidence.

Read more »

sale discount best price
Dividend Stocks

Time to Buy! 1 Dividend Stock That Hasn’t Been This Cheap in Years

This dividend stock provides practically everything: a stable income stream, steady occupancy rates, and more growth to come.

Read more »

jar with coins and plant
Dividend Stocks

The Smartest Dividend Stocks to Buy With $2,000 Right Now

Given their stable cash flows and consistent dividend growth, these two dividend stocks are ideal additions to your portfolios.

Read more »

Muscles Drawn On Black board
Dividend Stocks

Canadian Defensive Stocks to Buy Now for Stability

Two TSX defensive stocks offer capital protection and stability for risk-averse investors

Read more »

worker carries stack of pizza boxes for delivery
Dividend Stocks

Monthly Dividend Leaders: 3 TSX Stocks Paying Dividends Every 30 Days

These TSX stocks offer monthly dividends and attractive yields of more than 7%, making them top stocks for passive income.

Read more »

bulb idea thinking
Dividend Stocks

The Smartest Dividend Stocks to Buy With $3,000 Right Now

Do you have $3,000 and are wondering how to generate some extra income? These three dividend stocks present attractive value…

Read more »

Lights glow in a cityscape at night.
Dividend Stocks

The Best Stocks to Invest $1,000 in Right Now

Looking for some stocks that could be set for a big rebound in 2025? Here are two contrarians can buy…

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

Passive-Income Seekers: 2 BMO ETFs to Buy Aggressively for 2025

ETF investors should consider BMO Low Volatility Canadian Equity ETF (TSX:ZLB) and another income-oriented option.

Read more »