Fujian Apex SoftwareLTD (SHSE:603383) Is Increasing Its Dividend To CN¥1.10

Fujian Apex Software Co.,LTD's (SHSE:603383) dividend will be increasing from last year's payment of the same period to CN¥1.10 on 30th of May. This will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Fujian Apex SoftwareLTD

Fujian Apex SoftwareLTD's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Fujian Apex SoftwareLTD was paying out quite a large proportion of both earnings and cash flow, with the dividend being 97% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 85.4%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 53% which would be quite comfortable going to take the dividend forward.

Fujian Apex SoftwareLTD Doesn't Have A Long Payment History

Fujian Apex SoftwareLTD'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 annual payment during the last 6 years was CN¥0.255 in 2018, and the most recent fiscal year payment was CN¥1.10. This works out to be a compound annual growth rate (CAGR) of approximately 28% a year over that time. Fujian Apex SoftwareLTD has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Fujian Apex SoftwareLTD's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Fujian Apex SoftwareLTD has seen EPS rising for the last five years, at 14% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Fujian Apex SoftwareLTD's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Fujian Apex SoftwareLTD's payments are rock solid. Strong earnings growth means Fujian Apex SoftwareLTD has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Fujian Apex SoftwareLTD that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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