We received US$38.6656 (86 cents x 44.96 shares) from Air Products and Chemicals (APD). The 86 cents is the last quarterly payment for the fiscal year as it announced last Dec 2016 that the next quarterly payment will be 95 cents per share (or US$3.80 annualized, meaning 95 cents x 4 quarters). This new quarterly dividend is exciting, as we understand the historical dividend trend. It’s a no-brainer that based from the 10 year dividend growth, Air Products (APD) is growing by 10% every year however, if we take a closer look in the past 5 years, their dividends is growing (1) less than 10% and (2) growing at a decreasing rate (8.70% 5 Yrs > 7% 3Yrs > 6.2% 1 Yr). So why did they raised the dividend by 10% for 2017 and why do we care? That’s a great question isn’t it… the key is to simply understand the behavioral historical trends of the dividends and financial performance in the future and tie together the bits and pieces.
Based from the dividend payout ratio, it registered at 0.50. It can be interpreted as a bit high but if we clamped in the last 3 years, it had actually gone down from 0.66 in 2014. It’s a tell-tale that there’s a possibility of a higher dividend growth rate to come. Interestingly, in the past 5 years, when it registered a high dividend yield, it’s growth rate is above +10%. In the upcoming new dividends, it registered +2.7% dividend yield which is higher compared to the last 3 years (+2.6% in 2014, +2.1% in 2015 and +2.4% in 2016) and it is in the lower range of high Dividend Yield of 2012 (+2.8%) and 2013 (+3.3%), where dividend growth is +10% .
Now we understand the behavioral historical trend of the dividends, let us add in the financial performance outlook. The Chairman, President and CEO of Air Products (APD) Seifollah (or Seifi) Ghasemi said that the board’s decision to increase the dividends significantly are:
- Continuous confidence in Air Products’ financial strength and strong cash flow
- Having a “A” Credit Rating standing and capability to strategically deploy capital following the separation of Materials Technology
- Remain confident in the tremendous growth opportunities to invest in our core industrial gases business
In a nutshell… they’ll have a stable and strong performance next year… we can decipher that thought on the next article.
For the meantime, we are contemplating to add more shares and take the opportunity of their dividends growth for 2017.