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Advance Auto Parts (NYSE:AAP) Will Pay A Dividend Of $0.25

Simply Wall St · 3d ago

Advance Auto Parts, Inc. (NYSE:AAP) will pay a dividend of $0.25 on the 23rd of January. Based on this payment, the dividend yield on the company's stock will be 2.6%, which is an attractive boost to shareholder returns.

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Advance Auto Parts' Long-term Dividend Outlook appears Promising

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even in the absence of profits, Advance Auto Parts is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 5.6%, which makes us pretty comfortable with the sustainability of the dividend.

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NYSE:AAP Historic Dividend January 6th 2026

Check out our latest analysis for Advance Auto Parts

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.24 in 2016, and the most recent fiscal year payment was $1.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Advance Auto Parts' EPS has fallen by approximately 64% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Advance Auto Parts' Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Advance Auto Parts make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Advance Auto Parts (1 shouldn't be ignored!) that you should be aware of before investing. Is Advance Auto Parts not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.