Aperam (AMS:APAM) Has Announced A Dividend Of €0.425

Aperam S.A.'s (AMS:APAM) investors are due to receive a payment of €0.425 per share on 12th of December. The dividend yield will be 7.4% based on this payment which is still above the industry average.

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Aperam's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Aperam's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 102% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Looking forward, earnings per share is forecast to rise by 57.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Check out our latest analysis for Aperam

Aperam Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from €1.11 total annually to €2.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Aperam has impressed us by growing EPS at 13% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Aperam's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Aperam is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Aperam that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.