Appen Limited (ASX:APX) will pay a dividend of AU$0.055 on the 18th of March. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.
Appen's Earnings Easily Cover the Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Appen's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 60.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
Appen Doesn't Have A Long Payment History
Appen's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from US$0.016 in 2015 to the most recent annual payment of US$0.071. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Appen has been growing its earnings per share at 24% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
We Really Like Appen's Dividend
Overall, we like to see the dividend staying consistent, and we think Appen might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Appen that investors need to be conscious of moving forward. Is Appen not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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Appen Limited, together with its subsidiaries, operates as an AI lifecycle company that collects and labels image, text, speech, audio, video, and other data used to build and enhance artificial intelligence systems.
Flawless balance sheet and undervalued.