The board of APA Corporation (NASDAQ:APA) has announced that it will be paying its dividend of $0.25 on the 22nd of November, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.2%.
APA's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. However, APA's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 12.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.8% by next year, which is in a pretty sustainable range.
APA Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from $0.60 total annually to $0.50. Doing the maths, this is a decline of about 1.8% per year. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that APA has been growing its earnings per share at 162% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
APA Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, APA has 2 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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