Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Aperam S.A. (AMS:APAM) is about to go ex-dividend in just 3 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Aperam's shares on or after the 19th of August will not receive the dividend, which will be paid on the 16th of September.
The company's next dividend payment will be €0.42 per share, on the back of last year when the company paid a total of €2.00 to shareholders. Based on the last year's worth of payments, Aperam stock has a trailing yield of around 6.5% on the current share price of €30.76. If you buy this business for its dividend, you should have an idea of whether Aperam's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Aperam paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Aperam has grown its earnings rapidly, up 39% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Aperam has lifted its dividend by approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Has Aperam got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Aperam paid out less than half its earnings and a bit over half its free cash flow. Aperam looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Aperam has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 3 warning signs for Aperam (2 can't be ignored) you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.
Aperam S.A., together with its subsidiaries, engages in the production and sale of stainless and specialty steel products worldwide.
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Undervalued with solid track record and pays a dividend.