Here's Why We're Wary Of Buying APS Bank's (MTSE:APS) For Its Upcoming Dividend

APS Bank plc (MTSE:APS) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase APS Bank's shares before the 21st of August in order to receive the dividend, which the company will pay on the 1st of January.

The company's next dividend payment will be €0.00811 per share, and in the last 12 months, the company paid a total of €0.03 per share. Calculating the last year's worth of payments shows that APS Bank has a trailing yield of 6.1% on the current share price of €0.494. If you buy this business for its dividend, you should have an idea of whether APS Bank's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for APS Bank

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. APS Bank is paying out an acceptable 72% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit APS Bank paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. APS Bank's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 31% a year over the past five years.

APS Bank also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Unfortunately APS Bank has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is APS Bank an attractive dividend stock, or better left on the shelf? We're not overly enthused to see APS Bank's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. APS Bank doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that being said, if you're still considering APS Bank as an investment, you'll find it beneficial to know what risks this stock is facing. Every company has risks, and we've spotted 2 warning signs for APS Bank you should know about.

If you're in the market for strong dividend payers, we recommend checking 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.