The board of APA Corporation (NASDAQ:APA) has announced that it will pay a dividend of $0.25 per share on the 22nd of May. The dividend yield will be 6.7% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. APA's stock price has reduced by 41% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

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APA's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, APA was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 24.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for APA

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. The payments haven't really changed that much since 10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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. We are encouraged to see that APA has grown earnings per share at 62% per year over the past five years. APA is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like APA's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for APA that you should be aware of before investing. 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.