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Analyzing APD's Latest Dividend Yield and Dividend Payment

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Part 2
Analyzing APD's Latest Dividend Yield and Dividend Payment PART 2 OF 5

APD’s Dividend Growth Ensured a Good Dividend Yield for Investors

APD’s dividend yield

Investors who look for steady income prefer stocks that have a good dividend yield and good dividend growth. The dividend yield is a return that investors get for every dollar they invest in a company’s equity.

APD&#8217;s Dividend Growth Ensured a Good Dividend Yield for Investors

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After declaring its latest quarterly dividend, Air Products and Chemicals (APD) is expected to pay a dividend of $3.71 per share for 2017. With that dividend rate, its current dividend yield stands at ~2.5%, which is marginally ahead of its peer Praxair (PX). Praxair’s current dividend yield stands at 2.4%. Air Products and Chemicals’ aggressive dividend growth helped it maintain a dividend yield of 2.25%–3.30% in the past five years. Since 2012, Air Products and Chemicals’ stock price has risen at a compound annual growth rate of 12%, which is higher than its dividend growth of 8.2% for the same period.

However, Air Products and Chemicals’ current dividend yield is higher than the yield on one-year Treasury bonds. It’s another investment option for long-term investors.

Dividend payout

Air Products and Chemicals’ current dividend payout at the end of fiscal 3Q17 was 92% after adjusting a gain of $8.52 from the discontinued operations. Since 2012, Air Products and Chemicals’ dividend payout has been rising drastically due to the continued fall in its earnings per share. If the trend continues, Air Products and Chemicals will have to look its dividend growth again. Shareholders might support a higher dividend payout, but it would impact Air Products and Chemicals. The company wouldn’t have much left for future business expansion.

Investors can hold Air Products and Chemicals indirectly by investing in the Vanguard Materials ETF (VAW). VAW has invested 3.80% of its portfolio in Air Products and Chemicals. The fund’s other holdings include Monsanto (MON) and Sherwin-Williams (SHW) with weights of 6.0% and 3.30%, respectively, as of September 19, 2017.

In the next part, we’ll discuss analysts’ views and recommendations for Air Products and Chemicals.

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