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Is WiseTech Global a buy for its dividend?

The WiseTech Global Ltd (ASX: WTC) share price has risen 1.5% this week, but if you’ve been thinking of buying shares in the global software player for its growing, fully franked divided, there are a few things you need to know today.

The first is that shares will go ex-dividend tomorrow on Friday 6 September 2019. The ‘ex-date’ is when the shares start selling without the value of its next dividend payment so an investor needs to own the shares before the ex-date to receive the dividend. The dividend will then be paid on Friday 4 October 2019.

What is WiseTech Global’s dividend yield?

In its recent full-year results, WiseTech declared a final dividend of 1.95 cents per share (cps) for the second half of the financial year.

This was up 18% on the same period last year and gives WiseTech shares a trailing dividend yield of 0.1%, fully franked so, sure, if you’re looking for a top ASX income stock today WiseTech probably isn’t going to be it. 

The dividend represents a payout ratio of about 20%, which compared to the payout ratio of an income focused stock like SkyCity Entertainment Group Limited (ASX: SKC) isn’t much.

However, WiseTech is a rapidly evolving growth story and has a relentless focus on innovation so the vast majority of earnings are being injected back into the business to fuel growth rather than being used to shower investors with cash.

In the 2019 financial year, WiseTech notes that it invested 32% of total revenue on R&D compared to the 25% spent by Xero Limited (ASX: XRO) and 12% spent by Cochlear Limited (ASX: COH).

Is the dividend sustainable going forward?

The good news is, yes, given the high rate of growth WiseTech is achieving, it is highly likely that the dividend will be not only sustained but continue to grow in the years ahead.

At the company’s full-year update last month, WiseTech presented revenue growth of 57% and net profit after tax (NPAT) growth of 33% for the year.

Source: WiseTech Full year 2019 Presentation

It was a strong result and, combined with an outlook for revenue growth of up to 32% in FY20, sets up nicely the prospect of an increasing dividend even if the payout ratio stays unchanged.

If you’re looking for more bang for your buck when it comes to juicy, dividend paying companies today start here with our top dividend picks.

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Regan Pearson owns shares of Sky City Entertainment Group Ltd., WiseTech Global, and Xero.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and Xero. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended Cochlear Ltd. and Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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