MARKING PROGRESS: Founded in 1981, Bedford-based Progress Software Corp. first issued a dividend last year. This month it said it is increasing the quarterly payout by 12 percent, to 14 cents per share.
One of the things I have consistently preached in this blog is local companies that have shown a willingness and consistency to pay — and increase — dividends. The annual percentage increase one gets from dividends often far exceeds what one can expect from a paycheck or any (other) investment. This has been demonstrated in recent examples involving TJX Cos. and Raytheon, and to a lesser extent, Enterprise Bank.
Now I present to you Progress Software, a provider of enterprise software based in Bedford’s Oak Park.
Progress is pretty new to the dividend game — it only started paying them last year, and the yield is a modest 1.3 percent. But on Sept. 12, the company announced that it was giving its shareholders a 12 percent raise, as the quarterly payout increases from 12.5 cents per share to 14 cents per share, starting in December.
Adding to the good news was that Progress reported “preliminary” third-quarter earnings that were better than expected. The official report for what the company calls its third quarter (June 1 through Aug. 30) comes Wednesday afternoon. And if you’re a stock geek, you don’t want to miss that one — and it has nothing to do with dividends and earnings.
Progress has been in a bit of a tiff with its second-largest shareholder, a hedge fund called Praesidium Investment Management. During the summer, New York-based Praesidium requested (OK, demanded) that Progress replace Jack Egan, chairman of the board of directors, and to acquire an unnamed private company favored by the hedge fund.
This past week, Progress publicly responded negatively to those demands, saying Egan (son of Richard Egan, the “E” in EMC Corp.) had the support of directors and that the suggested acquisition “was not in the best interest” of shareholders.
Both Progress and Praesidium have declined to name the targeted company, although Reuters reported that it is Aptean Inc., an Atlanta-based enterprise software company that Reuters reported was put on the market last year in an effort to fetch $1 billion.
Praesidium managing partner Kevin Oram said in response to Progress’ statement Tuesday that Progress “did not address the central concerns of our letter and presentation,” which also include adding five board members, including a Praesidium representative. Praesidium later told the Boston Business Journal that it was “not going away,” although it has modestly reduced its stake in Progress in recent months.
(Disclosure: Oddly enough, Mr. Oram and I are high school classmates, although we have not spoken in about nine years).
As a shareholder, disagreements such as these shouldn’t necessarily be viewed as a bad thing. Praesidium, if nothing else, is pushing Progress to perform to its highest level. The company’s better-than-expected third-quarter earnings and dividend increase are certainly signs that the company is performing well, and if Praesidium (which told its investors earlier this year that 40 percent of its portfolio was in enterprise software) pushes it to do better, then it’s all the better for you.
Progress shares closed Friday at $37.29, and they’re up more than 18 percent so far this year. On Tuesday they reached their all-time closing high of $37.71.
Finally, Progress management has even given its shareholders some transparency on its dividend policy. In the release earlier this month, it said it was setting a target to pay out 25 percent to 30 percent of Progress’ annual cash flow from operations in dividends.