AP Memory Technology's (TWSE:6531) Dividend Will Be Increased To NT$7.00

The board of AP Memory Technology Corporation (TWSE:6531) has announced that it will be paying its dividend of NT$7.00 on the 11th of July, an increased payment from last year's comparable dividend. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for AP Memory Technology

AP Memory Technology's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, AP Memory Technology was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 20.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 66%, which is in the range that makes us comfortable with the sustainability of the dividend.

AP Memory Technology's Dividend Has Lacked Consistency

AP Memory Technology has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from NT$1.5 total annually to NT$7.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. AP Memory Technology has seen EPS rising for the last five years, at 39% per annum. AP Memory Technology is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

AP Memory Technology Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that AP Memory Technology is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for AP Memory Technology that investors should take into consideration. Is AP Memory Technology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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