Apollo Micro Systems' (NSE:APOLLO) Dividend Will Be Reduced To ₹0.25

Apollo Micro Systems Limited's (NSE:APOLLO) dividend is being reduced to ₹0.25 on the 28th of October. Based on this payment, the dividend yield will be 0.4%, which is lower than the average for the industry.

View our latest analysis for Apollo Micro Systems

Apollo Micro Systems' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Apollo Micro Systems was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 8.2% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 11%, which is definitely feasible to continue.

Apollo Micro Systems' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2018, the first annual payment was ₹1.00, compared to the most recent full-year payment of ₹0.25. This works out to a decline of approximately 75% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Come By

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Apollo Micro Systems' EPS has declined at around 8.2% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Apollo Micro Systems' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Apollo Micro Systems is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Apollo Micro Systems you should be aware of, and 1 of them can't be ignored. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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