Sylogist Ltd.'s (TSE:SYZ) investors are due to receive a payment of CA$0.01 per share on 10th of December. This makes the dividend yield 0.7%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Sylogist's stock price has reduced by 33% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

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If the payments aren't sustainable, a high yield for a few years won't matter that much. Sylogist is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to expand by 127.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 109%, which probably can't continue without putting some pressure on the balance sheet.

See our latest analysis for Sylogist

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from CA$0.24 total annually to CA$0.04. The dividend has fallen 83% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings per share has been sinking by 69% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sylogist's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Sylogist that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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