Updated 3/5/25
Amdocs Limited (NASDAQ: DOX) is a global software and services company that plays a key role in helping telecom, media, and financial services firms streamline operations and monetize services. Over the years, it has built a reputation as a leader in customer experience solutions, particularly for major telecom providers.
For dividend investors, Amdocs offers a compelling mix of steady income, strong financials, and a history of rewarding shareholders. Let’s take a closer look at its dividend profile and what makes it a potentially attractive stock for income-focused investors.
Key Dividend Metrics
💰 Dividend Yield: 2.44% (Forward)
📈 5-Year Average Yield: 1.92%
💵 Annual Dividend: $2.11 per share
🔄 Dividend Growth: Steady increases over the years
📊 Payout Ratio: 44.35%
📅 Next Dividend Payment: April 25, 2025
⚖ Ex-Dividend Date: March 31, 2025
Dividend Overview
Amdocs offers a forward dividend yield of 2.44%, which is slightly above its five-year average of 1.92%. This means investors today are locking in a higher-than-normal yield compared to historical levels. With an annual dividend of $2.11 per share, it provides a steady stream of income, and the payout ratio of 44.35% suggests the company is distributing less than half of its earnings as dividends.
A sustainable payout ratio like this is important because it allows Amdocs to continue investing in its business while still returning cash to shareholders. The company also supplements its dividend program with stock buybacks, reinforcing its commitment to rewarding long-term investors.
One of the appealing aspects of Amdocs is its low beta of 0.69. This indicates the stock is less volatile than the overall market, making it an appealing choice for conservative investors who prefer stable dividend payers.
Dividend Growth and Safety
A company’s ability to consistently raise its dividend is a key indicator of financial strength and commitment to shareholders. Amdocs has delivered reliable dividend increases, making it an attractive option for those seeking growing income over time.
Several factors make Amdocs’ dividend appear safe and sustainable.
- The payout ratio of 44.35% leaves plenty of room for reinvestment and future dividend hikes.
- Operating cash flow of $647.6 million and free cash flow of $604.43 million provide ample liquidity to fund dividend payments.
- Amdocs has a history of steady dividend growth, a positive sign for income-focused investors.
Given these factors, the company is well-positioned to maintain and potentially increase its dividend in the coming years.
Chart Analysis
The price action of Amdocs (DOX) has been showing a recovery after a significant downtrend that took place in the first half of the chart. The stock previously experienced a prolonged decline, falling below both the 50-day and 200-day simple moving averages, which signaled a bearish phase. However, momentum shifted as the stock bottomed out and began forming a series of higher lows.
The 50-day moving average (orange line) crossed below the 200-day moving average (blue line) earlier in the downtrend, a classic bearish signal known as the “death cross.” Since then, the stock has made an effort to reclaim key levels, with price now stabilizing above both moving averages, a sign of renewed strength.
Volume trends indicate periods of accumulation, with notable spikes in buying activity, particularly during the recovery phase. The increased volume near key breakout levels suggests institutional involvement. However, some heavy red-volume days also appear, showing moments of strong selling pressure.
The RSI, currently near 50.86, reflects a neutral position, suggesting that the stock is neither overbought nor oversold. This indicates that price action could move in either direction based on upcoming catalysts. The RSI has previously shown a few instances of peaking above 70, hinting at overbought conditions that led to short-term pullbacks.
The last five candles show a mix of indecision and strength. The most recent candle closed at 91.89, slightly below the day’s high of 92.03. The wick on the top suggests some selling pressure near resistance, but the overall structure shows resilience. The last few sessions have maintained prices near their recent highs, which could indicate consolidation before the next move.
Overall, the price remains above key moving averages, suggesting underlying support, while momentum appears steady with a slight bullish tilt. However, traders will likely watch for confirmation of a breakout or a potential retracement before making further decisions.
Analyst Ratings
📈 Upgrades:
- 🔼 On November 13, 2024, Oppenheimer raised its price target for Amdocs from $98.00 to $105.00, maintaining an outperform rating. This upgrade was driven by the company’s solid financial performance and its strong position in the market.
📉 Downgrades:
- 🔽 On February 28, 2025, StockNews.com downgraded Amdocs from a strong-buy rating to a buy rating. This adjustment reflects a more cautious stance, possibly due to concerns about the company’s future growth prospects.
🎯 Consensus Price Target:
- As of March 5, 2025, the consensus among analysts is a moderate buy rating for Amdocs, with an average price target of $101.20. This suggests an anticipated upside of approximately 17.02% from the current stock price of $86.48.
- The price targets range from a low of $90.00 to a high of $111.00, indicating varied expectations about the company’s future performance.
These recent analyst actions highlight a balanced view of Amdocs, with some analysts expressing optimism about its financial health and market position, while others adopt a more cautious approach due to potential challenges ahead.
Earnings Report Summary
Amdocs recently released its latest earnings report, giving investors a closer look at how the company is performing. Revenue for the quarter came in at $1.11 billion, which was down 10.9% compared to the same time last year. However, when you strip out currency fluctuations and some non-core business activities, revenue actually showed a slight increase of 1.7% year-over-year.
One of the biggest drivers of Amdocs’ business continues to be its managed services segment, which brought in $729 million—roughly 66% of total revenue. This part of the business has been growing at a slow but steady pace, up just under 1% from the previous year.
On the profitability side, Amdocs delivered some encouraging news. The company’s operating margin improved to 17.9%, a notable increase from last year. This jump in profitability is largely due to Amdocs phasing out lower-margin business areas and focusing on efficiency. This strategy seems to be paying off, allowing the company to generate stronger profits even as total revenue takes a hit.
Amdocs also reported a 12-month backlog of $4.14 billion, which represents a steady increase both quarter-over-quarter and year-over-year. This backlog is a key indicator of future revenue, suggesting that demand for Amdocs’ services remains solid despite some short-term headwinds.
Shareholders will likely appreciate that Amdocs is continuing to reward investors through stock buybacks. The company repurchased $144 million worth of shares during the quarter, reinforcing its commitment to returning capital to investors.
Looking ahead, Amdocs maintained its full-year guidance, expecting revenue growth of 1% to 4.5% on a pro forma basis (excluding certain business exits and currency fluctuations). However, if you factor in the areas Amdocs is strategically phasing out, total revenue is projected to decline somewhere between 8.5% and 11.6% year-over-year.
Overall, this earnings report highlights a company making strategic shifts toward higher-margin areas while maintaining a solid financial position. While some numbers might look negative at first glance, Amdocs appears to be playing the long game—focusing on profitability, efficiency, and sustainable growth.
Financial Health and Stability
A strong dividend is only sustainable if the company behind it has solid financials. Fortunately, Amdocs checks several key boxes when it comes to financial stability.
- The company generated $4.87 billion in revenue over the last twelve months. However, quarterly revenue growth has slowed, down 10.9% year-over-year.
- Profitability remains strong, with an operating margin of 18.52% and a profit margin of 10.19%.
- Debt levels are manageable, with a total debt of $793.79 million and a debt-to-equity ratio of 22.64%.
- Return on equity stands at 14.05%, indicating efficient use of shareholder capital.
The balance sheet remains healthy, with $349.01 million in cash on hand, giving Amdocs plenty of flexibility to fund operations, dividends, and potential share repurchases.
Valuation and Stock Performance
From a valuation perspective, Amdocs appears reasonably priced. The stock trades at a trailing price-to-earnings (P/E) ratio of 20.02 and a forward P/E of 12.45, suggesting investors are paying a fair price relative to its earnings growth potential.
Some additional valuation metrics to consider:
- Price-to-sales ratio: 2.01, meaning investors pay $2.01 for every $1 in sales.
- PEG ratio (five-year expected): 1.13, indicating a fair valuation given projected growth.
- Price-to-book ratio: 2.80, suggesting the stock isn’t overpriced relative to its assets.
Over the past year, Amdocs has traded between $74.41 and $94.04, with the stock currently sitting around $88.04. It’s close to its 50-day moving average of $86.27 and its 200-day moving average of $84.88, indicating relative stability.
Risks and Considerations
While Amdocs offers many positives for dividend investors, there are some risks to keep in mind.
- Revenue growth has slowed, with a year-over-year decline of 10.9%. If this trend continues, it could impact future profitability.
- The company relies heavily on a few major telecom clients. Any disruption in these relationships could affect revenue.
- Economic downturns could lead to reduced IT spending by telecom and media companies, potentially impacting earnings.
- As a global company, Amdocs faces foreign exchange risks that could affect reported earnings.
Final Thoughts
For investors looking for a steady dividend payer with a track record of financial stability, Amdocs presents an appealing option. The stock offers a solid dividend yield, a sustainable payout ratio, and consistent dividend growth, making it a strong choice for income-focused portfolios.
With a healthy balance sheet, manageable debt levels, and a focus on returning capital to shareholders, Amdocs appears well-positioned to continue rewarding investors. However, it’s important to monitor revenue trends and client concentration risks.
Overall, Amdocs stands out as a stable dividend payer with relatively low volatility, making it a solid option for conservative investors seeking reliable income.
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