Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Aptitude Software Group plc (LON:APTD) has been paying a dividend to shareholders. Today it yields 1.8%. Should it have a place in your portfolio? Let’s take a look at Aptitude Software Group in more detail.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Aptitude Software Group fare?
Aptitude Software Group has a trailing twelve-month payout ratio of 29%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect APTD’s payout to increase to 33% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.0%. However, EPS is forecasted to fall to £0.16 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Aptitude Software Group generates a yield of 1.8%, which is on the low-side for Software stocks.
Taking all the above into account, Aptitude Software Group is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for APTD’s future growth? Take a look at our free research report of analyst consensus for APTD’s outlook.
- Valuation: What is APTD worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether APTD is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.