Should you buy Aperam SA (AMS:APAM) for its next dividend?

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Aperam S.A. (AMS:APAM) The stock is set to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company’s record date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. This means investors who buy Aperam shares on or after March 1 will not receive the dividend, which will be paid on March 24.

The company’s next dividend is €0.42 per share, after the last 12 months, when the company distributed a total of €2.00 per share to shareholders. Based on last year’s payouts, Aperam stock has a yield of around 4.2% on the current share price of €47.55. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! We therefore need to check whether dividend payments are covered and whether profits are increasing.

Check out our latest analysis for Aperam

Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Aperam has a low and conservative payout ratio of just 16% of its after-tax income. A useful secondary check may be to assess whether Aperam has generated sufficient free cash flow to pay its dividend. It distributed 35% of its free cash flow as dividends, a comfortable level of distribution for most companies.

It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

ENXTAM: APAM Historic Dividend February 25, 2022

Have earnings and dividends increased?

Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. It is encouraging to see that Aperam has grown its revenues rapidly, growing by 37% per year over the past five years. Earnings per share have grown very rapidly and the company is paying out a relatively small percentage of its earnings and cash flow. This is a very favorable combination that can often lead to dividend multiplication in the long run, if profits increase and the company pays out a higher percentage of its profits.

Most investors primarily gauge a company’s dividend prospects by checking the historical rate of dividend growth. Aperam has recorded dividend growth of 14% per year on average over the past 10 years. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing at the same time.

To summarize

Does Aperam have what it takes to maintain its dividend payments? It’s great that Aperam is growing its earnings per share while simultaneously paying out a small percentage of its earnings and cash flow. It’s disappointing to see the dividend cut at least once in the past, but as things stand the low payout ratio suggests a conservative approach to dividends, which we like. Aperam looks solid on this overall analysis, and we would definitely consider investigating it further.

On that note, you’ll want to research the risks that Aperam faces. For example, we have identified 3 warning signs for Aperam (2 make us uncomfortable) that you should be aware of.

If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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