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Aperam S.A. (AMS:APAM) will pay a dividend of €0.425 on the 12th of June. This means the annual payment is 7.3% of the current stock price, which is above the average for the industry.
Aperam's Projected Earnings Seem Likely To Cover Future Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Aperam's dividend was only 63% of earnings, however it was paying out 127% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
The next year is set to see EPS grow by 48.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Aperam
Aperam Doesn't Have A Long Payment History
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 9 years was €1.11 in 2016, and the most recent fiscal year payment was €2.00. This means that it has been growing its distributions at 6.8% per annum over that time. Aperam has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Aperam has been growing its earnings per share at 12% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Aperam's payments, as there could be some issues with sustaining them into the future. While Aperam is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Aperam that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.