Aptech Limited (NSE:APTECHT) has announced that it will be increasing its dividend on the 3rd of June to ₹5.00, which will be 122% higher than last year. Even though the dividend went up, the yield is still quite low at only 1.6%.
See our latest analysis for Aptech
Aptech's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Aptech's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Earnings per share could rise by 19.8% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 78%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from ₹2.50 in 2012 to the most recent annual payment of ₹2.25. This works out to be a decline of approximately 1.0% per year 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.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Aptech has been growing its earnings per share at 20% a year over the past five years. Aptech definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Aptech Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Aptech is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Aptech (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About NSEI:APTECHT
Flawless balance sheet established dividend payer.
