APS Bank's (MTSE:APS) Dividend Will Be €0.017

APS Bank plc (MTSE:APS) has announced that it will pay a dividend of €0.017 per share on the 1st of January. Despite the cut, the dividend yield of 4.9% will still be comparable to other companies in the industry.

View our latest analysis for APS Bank

APS Bank's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having paid out dividends for only 2 years, APS Bank does not have much of a history being a dividend paying company. Diving into the company's earnings report, the payout ratio is set at 70%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

Looking forward, EPS could fall by 34.2% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 63%, which is definitely feasible to continue.

APS Bank's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 2 years was €0.0268 in 2023, and the most recent fiscal year payment was €0.0301. This means that it has been growing its distributions at 6.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. APS Bank might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though APS Bank's EPS has declined at around 34% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On APS Bank's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for APS Bank (of which 1 makes us a bit uncomfortable!) you should know about. 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.