The board of directors Aptitude Software Group plc (LON:APTD) has announced that it will pay a dividend of £0.036 per share on June 14. This means the annual payment will be 1.8% of the current share price, which is in line with the industry average.
See our latest analysis for Aptitude Software Group
Aptitude Software Group’s revenues easily cover benefits
While it’s always good to see a solid dividend yield, we should also consider whether the payout is feasible. Before this announcement, Aptitude Software Group paid out 75% of profits, but a relatively small 27% of free cash flows. This leaves sufficient money to reinvest in the company.
If recent trends continue, earnings per share are expected to decline 6.6% over the next twelve months. However, if the dividend continues to follow recent trends, we estimate that the payout ratio could reach 81%, meaning most of the company’s profits are paid out to shareholders.
Dividend volatility
The company’s dividend history has been marked by instability, with at least one cut in the past decade. The annual payment over the past 10 years was £0.125 in 2014, and the most recent payment in the financial year was £0.054. If you do the calculations, this is a decline of about 8.0% per year. A company that cuts its dividend over time is generally not what we look for.
Dividend growth is questionable
With a relatively unstable dividend and a poor history of declining dividends, it’s even more important to see if earnings per share are growing. Over the past five years, Aptitude Software Group’s earnings per share have shrunk to about 6.6% per year. Falling profits will inevitably lead to the company paying a lower dividend in line with lower profits.
In summary
Overall, we don’t think this company is a great dividend stock, even if the dividend hasn’t been cut this year. Payments haven’t been particularly stable and we don’t see huge growth potential, but because the dividend is well covered by cash flows, it could prove to be reliable in the short term. Overall, we don’t think this company has the makings of a good earnings share.
Investors generally prefer companies with a consistent, stable dividend policy over companies with an irregular dividend policy. Despite the importance of dividend payments, they aren’t the only factors our readers should know when assessing a company. If you want a closer look, it’s worth checking out our free research into Aptitude Software Group management tenure, salary and performance. Is Aptitude Software Group not quite the opportunity you were looking for? Take a look at our selection of top dividend stocks.
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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.