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

financial freedom sign
Dividend Stocks

Generate Enough Passive Income to Retire

Looking to generate a stream of passive income to retire on? Here are several stocks to start building out your…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Stocks to Hold for a Reliable Source of Passive Income

Are you looking for a way to produce a reliable source of passive income? Hold these three stocks!

Read more »

worry concern
Dividend Stocks

3 Stocks to Buy if You Are Worried About a Recession

There are a lot of safe investments that can help your portfolio remain afloat during a recession and the market…

Read more »

Two colleagues working on new global financial strategy plan using tablet and laptop.
Dividend Stocks

2 Canadian Dividend Stocks I Just Bought During the Selloff 

There are plenty of high-quality investments to consider today, but these two Canadian dividend stocks are easily among the best.

Read more »

Dividend Stocks

Top 3 Utility Stocks for Stability and Consistent Income

These utility stocks could continue to return cash, irrespective of the volatility in the market.

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Tradeoff: Lower Home Prices for Higher Debt Burden

Buyers welcome lower home prices but more rate hikes will increase their financial burdens.

Read more »

Dividend Stocks

1 Top REIT to Buy Amid Housing Price Cooldown

Consider investing in this Canadian REIT if you want to capitalize on the housing price cooldown right now.

Read more »

stock analysis
Dividend Stocks

TFSA Passive Income: 2 Oversold Dividend Stocks for Self-Directed Investors

These top TSX dividend stocks look cheap right now.

Read more »