Air Products and Chemicals (NYSE:APD) Is Increasing Its Dividend To $1.77
The board of Air Products and Chemicals, Inc. (NYSE:APD) has announced that it will be paying its dividend of $1.77 on the 13th of May, an increased payment from last year's comparable dividend. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Air Products and Chemicals
Air Products and Chemicals' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Air Products and Chemicals was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to rise by 55.0% over the next year. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.
Air Products and Chemicals Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $2.84 in 2014 to the most recent total annual payment of $7.08. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
We Could See Air Products and Chemicals' Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Air Products and Chemicals has been growing its earnings per share at 6.9% 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
Overall, we always like to see the dividend being raised, but we don't think Air Products and Chemicals will make a great income stock. While Air Products and Chemicals is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Air Products and Chemicals that investors should know about before committing capital to this stock. 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.
