Bentley Systems' Dividend Machine: A Steady Bet in the Engineering Software Sector

In an era where tech companies often prioritize growth over dividends, Bentley Systems (NASDAQ: BSY) stands out as a rare breed: a software giant with a consistent dividend policy and the financial fortitude to sustain it. With a payout ratio below half the sector average, a 16.67% dividend hike in 2025, and a revenue engine fueled by infrastructure demand, this engineering software leader offers a compelling opportunity for income-focused investors. Let's dissect why now could be the time to act.

The Dividend Growth Story: Small but Steady

Bentley's dividend history since 2021 tells a story of cautious but deliberate growth. After starting at $0.03 per share annually, the dividend climbed to $0.22 annually by . In early 2025, it surged to $0.28 annually—a 16.67% increase—thanks to a $0.01 per-share hike in Q1 2025. While the yield of 0.59% is modest compared to the tech sector's 1.58%, the payout ratio paints a more promising picture. At just 18.3% in 2024 and 29.49% in 2025, Bentley's dividends consume a fraction of its earnings, leaving ample room for future hikes. For context, the tech sector's average payout ratio is 39.6%. This conservatism is a hallmark of sustainability.

The Financial Backing: Cash Flow, Margins, and Resilience

Bentley's dividend muscle is underpinned by robust free cash flow and margin expansion. In 2024, free cash flow hit $435 million, up from $417 million in 2023. Q1 2025 saw another jump, with free cash flow reaching $216.4 million—a 7.5% year-over-year increase. Meanwhile, adjusted operating margins expanded to 27.5% in 2024, with a 2025 target of 28.5%. This profitability isn't luck—it's the result of a 92%-subscription revenue model, which insulates the company from economic volatility.

Revenue growth remains steady, too. Total revenue rose 10.1% in 2024 to $1.35 billion, with subscription revenue up 13.2%. In Q1 2025, subscription revenue climbed 12.7% on a constant-currency basis. The Annual Recurring Revenue (ARR), a key metric for SaaS companies, grew 12% year-over-year to $1.32 billion. With a net retention rate of 110%, Bentley isn't just acquiring customers—it's retaining and upselling them, creating a flywheel effect for future growth.

Why the Engineering Software Sector Matters

Bentley operates in the infrastructure engineering software niche, a sector less prone to economic swings than consumer tech. Governments and corporations worldwide are pouring trillions into resilient infrastructure projects—from smart cities to climate-proof bridges. This tailwind aligns perfectly with Bentley's digital twin technology, which helps engineers design and manage complex projects.

As CEO Nicholas Cumins noted, “Infrastructure spending isn't a luxury—it's a necessity.” With engineers globally stretched thin and project backlogs growing, Bentley's tools for automated design, risk modeling, and lifecycle management are in high demand. This demand isn't just sustaining revenue—it's fueling margin expansion and cash flow.

Risks? Yes, But Manageable

No investment is without risks. Bentley faces geopolitical tensions, especially in markets like China, and macroeconomic slowdowns could delay infrastructure projects. Its stock also trades at elevated multiples compared to peers. However, the company's diversified revenue streams (geographically and by industry) and $415–$455 million free cash flow guidance for 2025 suggest it can weather most storms.

The Case for Action Now

For income investors, the calculus is clear:
- Low payout ratio (under 30%) means dividends are safe even if revenue flattens.
- Free cash flow growth funds both dividends and buybacks (which BSY uses to offset stock-based compensation dilution).
- Infrastructure tailwinds promise steady demand for Bentley's solutions.

While the 0.59% dividend yield may seem small, the total shareholder return—combining dividends and capital appreciation—could outpace broader tech indices over the next five years.

Final Take: A Dividend Sleeper with Upside

Bentley Systems isn't a high-yield dividend stock. But it's a high-quality growth company with a dividend policy that's both sustainable and poised to grow. With a payout ratio still comfortably below sector peers, and a business model aligned with global infrastructure needs, this could be a rare “best of both worlds” pick.

For investors willing to look beyond flashy consumer tech names, Bentley Systems offers a steady, scalable dividend machine in an overlooked corner of the market. The data points to one conclusion: now is the time to add this to your portfolio.

DISCLAIMER: This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.