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Apogee Enterprises, Inc. (NASDAQ:APOG) Passed Our Checks, And It's About To Pay A US$0.20 Dividend

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Simply Wall St
·4 min read
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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Apogee Enterprises, Inc. (NASDAQ:APOG) is about to go ex-dividend in just 3 days. This means that investors who purchase shares on or after the 29th of January will not receive the dividend, which will be paid on the 16th of February.

Apogee Enterprises's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Calculating the last year's worth of payments shows that Apogee Enterprises has a trailing yield of 2.1% on the current share price of $37.88. If you buy this business for its dividend, you should have an idea of whether Apogee Enterprises's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Apogee Enterprises

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Apogee Enterprises paid out a comfortable 28% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Apogee Enterprises, with earnings per share up 8.7% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Apogee Enterprises has delivered an average of 9.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Apogee Enterprises worth buying for its dividend? Earnings per share have been growing moderately, and Apogee Enterprises is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Apogee Enterprises is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Apogee Enterprises for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 4 warning signs for Apogee Enterprises (1 doesn't sit too well with us) you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.