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Aptitude Software Group plc (LON:APTD) will pay a dividend of UK£0.018 on the 27th of August. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.
Aptitude Software Group's Payment Has Solid Earnings Coverage
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by Aptitude Software Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to fall by 7.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 45%, which is comfortable for the company to continue in the future.
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the first annual payment was UK£0.044, compared to the most recent full-year payment of UK£0.054. This implies that the company grew its distributions at a yearly rate of about 2.0% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Aptitude Software Group has grown earnings per share at 11% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Aptitude Software Group Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Aptitude Software Group might even raise payments in the future. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Are management backing themselves to deliver performance? Check their shareholdings in Aptitude Software Group in our latest insider ownership analysis. We have also put together a list of global stocks with a solid dividend.
This article by Simply Wall St is general in nature. 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.
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