Once upon a time, the Altium Limited (ASX: ALU) share price was well known for its exceptional performance. More recently, the PCB design software provider has lost its reputation for extreme share price rises. Instead, the tech company has begun to attract appeal with its steadily climbing dividends.
As we covered in our ‘dividend beasts’ article on Friday, substantial changes in the share price of a company can lead to fluctuations in the dividend yield. Given the Altium share price has been knocked down 27% in 2022, it might be time to review its yield.
Let’s find out what passive income investors can now expect from Altium.
Six of one, half a dozen of the other
Typically, a falling share price over a period of time will result in a marginally higher dividend yield. This is simply due to the way a dividend yield is calculated — which is, dividends for the trailing 12-months divided by the share price.
For example, in Altium’s case: 30 cents per share US (AU$0.41) ÷ $32.77 = 1.25%
However, a falling share price doesn’t automatically result in an increased dividend yield. Note that there are two variables in the equation, the other being the dividends per share (DPS). If the DPS were to fall in line with the share price, the result would be a relatively flat dividend yield.
For Altium, the share price has fallen significantly in combination with the DPS increasing since the beginning of the year. In turn, the dividend yield has been boosted from 1.1% to its current 1.25%.
Despite not really being known for its dividends, Altium has managed to notch up its payouts each year for the past 10 years. This has been in line with the board’s policy of paying out 50% to 80% of net profit after tax (NPAT).
Is the Altium share price worth the squeeze?
The once illustrious ‘WAAAX‘ constituent has seen better days, but the team at Bell Porter is still keen on Altium.
As covered by my colleague Sebastian, the broker foresees strong profit growth ahead for Altium. At the same time, the broker doesn’t believe the headwinds that have hounded the investment case for the company are dealbreakers.
The team currently holds a target of $41.25 for the Altium share price. This would suggest a potential upside of 26%.