Apex Dynamics (TWSE:4583) Will Pay A Dividend Of NT$10.00

Apex Dynamics, Inc. (TWSE:4583) will pay a dividend of NT$10.00 on the 25th of April. This means the annual payment is 4.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Apex Dynamics

Apex Dynamics Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before this announcement, Apex Dynamics was paying out 80% of earnings, but a comparatively small 73% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

EPS is set to grow by 0.006% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 99%, which is a bit high and could start applying pressure to the balance sheet.

Apex Dynamics Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the annual payment back then was NT$6.00, compared to the most recent full-year payment of NT$10.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Apex Dynamics hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Apex Dynamics is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Apex Dynamics that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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