APS Bank's (MTSE:APS) Shareholders Will Receive A Smaller Dividend Than Last Year

APS Bank plc (MTSE:APS) is reducing its dividend from last year's comparable payment to €0.0081 on the 1st of January. The dividend yield of 8.6% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for APS Bank

APS Bank Not Expected To Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Looking at its history, APS Bank does not yet have a history of paying out dividends, with this year being its first year of distribution. Diving into the company's earnings report, the payout ratio is set at 72%, which is a decent ratio of dividend payment to earnings, and may sustain future dividends if the company stays at its current trend.

EPS is set to fall by 35.5% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the future payout ratio could reach 98%, which could put the dividend under pressure if earnings don't start to improve.

APS Bank Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. APS Bank's earnings per share has shrunk at 36% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

APS Bank's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. For example, we've picked out 2 warning signs for APS Bank that investors should know about before committing capital to this stock. Is APS Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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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