Updated 3/5/25

Apogee Enterprises (NASDAQ: APOG) is a company that flies under the radar but plays a crucial role in commercial construction. Specializing in architectural glass, framing, and building solutions, it has built a reputation for quality and efficiency. While it’s not the first name that comes to mind for dividend investors, its consistent payouts and disciplined financial management make it a stock worth considering.

For those who prioritize income, Apogee offers a reasonable dividend yield with strong coverage, backed by a company that has been around for decades. But is it the right fit for a long-term portfolio? Let’s take a closer look at its dividend profile, financial stability, and overall investment appeal.

📊 Key Dividend Metrics

🔹 Dividend Yield: 2.19%
🔹 Annual Dividend: $1.04 per share
🔹 Payout Ratio: 22.37%
🔹 5-Year Average Dividend Yield: 2.10%
🔹 Consecutive Years of Dividend Growth: 12+
🔹 Most Recent Dividend Increase: 4%
🔹 Ex-Dividend Date: January 28, 2025
🔹 Next Dividend Payment: February 12, 2025

Dividend Overview

Apogee isn’t a high-yield stock, but it offers a steady and reliable dividend that’s well-covered by earnings. Its current yield of 2.19% is in line with its historical average, and its payout ratio is a conservative 22.37%. That means the company is returning a portion of its earnings to shareholders while keeping plenty of capital for reinvestment.

One of the standout qualities of Apogee is its consistency. The company has been increasing its dividend for more than a decade, showing a strong commitment to rewarding investors. While the dividend growth rate has been moderate, it’s built on solid financial footing rather than aggressive payouts that could become unsustainable.

Dividend Growth and Safety

Apogee has been increasing its dividend for over 12 years, which signals a management team that prioritizes steady shareholder returns. The most recent increase was 4%, which is respectable given the current economic environment.

What Makes the Dividend Safe?

✅ Low payout ratio of just 22.37%, leaving room for future increases
✅ Strong free cash flow generation, with $170 million in operating cash flow over the last year
✅ A business model that serves a steady demand in commercial construction

One area to keep an eye on is the company’s earnings growth. Quarterly earnings dropped 22.2% year over year, which could limit the pace of future dividend hikes. However, with such a low payout ratio, the company has enough flexibility to maintain its dividend even if earnings fluctuate.

Potential Risks to Dividend Growth

⚠️ Apogee operates in the construction industry, which can be cyclical and affected by economic slowdowns
⚠️ Earnings have been volatile, which could impact future dividend growth
⚠️ Interest rate increases and commercial real estate downturns could pressure revenue

While these risks exist, Apogee’s strong cash flow and disciplined financial management provide a safety net, making a dividend cut unlikely in the near future.

Chart Analysis

The stock chart for Apogee Enterprises (APOG) shows a significant shift in momentum over the past year. The price experienced a strong uptrend for most of last year, with the 50-day moving average (orange line) staying above the 200-day moving average (blue line). This alignment typically signals bullish momentum and strong investor confidence.

However, a major breakdown occurred after hitting highs above $80. The price dropped sharply, slicing through both moving averages with heavy volume, which suggests that institutional investors may have been offloading shares. The 50-day moving average has now turned downward and is well below the 200-day moving average, reinforcing a bearish trend.

Volume spikes, particularly during the sharp decline, indicate panic selling or a large reallocation of shares. Since then, the price has been trending lower, making lower highs and lower lows. Attempts at stabilization near the $50 level have been met with resistance, keeping the stock in a downtrend.

The Relative Strength Index (RSI) at the bottom of the chart dipped into oversold territory during the steep decline and has struggled to recover. Recently, there has been a slight uptick, suggesting a potential relief bounce or a pause in selling pressure. However, the RSI remains on the weaker side, implying that the stock hasn’t regained strong upward momentum yet.

The 200-day moving average is beginning to flatten, which could indicate a longer-term shift in trend. The price currently sits well below both moving averages, signaling that the stock is still in a bearish phase. Any attempt at a recovery would likely face resistance at the 50-day moving average, which has been acting as a ceiling in recent months.

Analyst Ratings

Apogee Enterprises (APOG) has received a mix of analyst upgrades and downgrades in recent months, reflecting different viewpoints on the company’s financial health and market position.

📈 Upgrades:

• 🟢 Sidoti upgraded the stock from “neutral” to “buy” on January 10, 2025. Analysts pointed to the stock’s sharp decline as an opportunity, believing its valuation had become attractive. The firm also expressed confidence in Apogee’s long-term fundamentals and strategic execution.
• 🟢 Singular Research raised its rating to “moderate buy” on January 14, 2025. This upgrade was driven by optimism surrounding the company’s operational improvements and potential for steady revenue growth despite industry challenges.

📉 Downgrades:

• 🔴 DA Davidson shifted its rating from “buy” to “neutral” on January 8, 2025, while lowering the price target from $75.00 to $62.00. The downgrade was based on concerns over earnings volatility and the overall slowdown in commercial construction, which could weigh on Apogee’s short-term performance.

The current consensus price target for Apogee Enterprises is $62.00, which suggests some upside potential from current levels. Analysts remain split, with some seeing a long-term recovery while others remain cautious due to industry headwinds.

Earnings Report Summary

Apogee Enterprises just released its latest earnings report, and there’s a lot to unpack. While the company managed to keep revenue steady, some challenges showed up in profitability, and certain business segments felt the pressure.

Revenue for the quarter came in at $341.3 million, which was barely up from last year—just a 0.5% increase. While that might not seem like much, it’s still growth. The bigger concern was operating income, which dropped 24% to $28.6 million. That means the company’s profit margin took a hit, falling from 11.1% to 8.4%.

The bottom line also slipped. Net earnings came in at $21 million, down 22.2% from the same time last year. That translated into earnings per share (EPS) of $0.96, compared to $1.23 previously. Adjusted EPS, which removes one-time costs, landed at $1.19, still slightly lower than last year’s figure.

Which Business Segments Struggled, and Which Performed?

• Architectural Framing Systems saw a 6.6% drop in sales, bringing in $164.5 million. The decline was due to lower demand and a less favorable product mix.
• Architectural Glass also took a hit, with revenue slipping 4.3% to $85.9 million because of weaker volumes.
• Architectural Services, on the other hand, actually saw a nice 10.8% increase to $66.8 million. This was driven by a stronger mix of projects.
• Large-Scale Optical (LSO) was the standout, jumping 12.2% to $24.1 million. A big reason for this boost was Apogee’s recent acquisition of UW Solutions, which specializes in high-performance coated substrates.

The Big Acquisition

Speaking of UW Solutions, Apogee closed the deal on November 4, 2024, paying $242 million in cash. The move is expected to strengthen the company’s LSO segment and expand its market reach.

Cash Flow and Debt

The company’s cash flow from operations dropped this quarter, coming in at $31 million compared to $66.7 million last year. Year-to-date, Apogee has generated $95.1 million, but that’s still lower than the $129.3 million reported a year ago. A big factor behind this decline? The company needed more working capital to run its business.

Debt has also increased. Long-term debt now sits at $272 million, reflecting the costs associated with the UW Solutions deal. Apogee used its credit facility to fund the acquisition, which pushed its leverage ratio up to 1.3x.

Looking Ahead

The company had to adjust its full-year forecast to account for some challenges. Net sales are now expected to decline by around 5%, even with the $30 million boost expected from the UW Solutions acquisition. Apogee also warned that fourth-quarter volumes might be weaker than expected, which means full-year adjusted EPS is likely to land at the lower end of its previous guidance of $4.90 to $5.20.

Despite some near-term struggles, Apogee remains focused on long-term growth and strategic moves, including acquisitions, to improve its position in the market.

Financial Health and Stability

Apogee’s ability to maintain and grow its dividend depends on its financial strength. Looking at its balance sheet, the company appears to be in solid shape.

Key Balance Sheet Metrics

✅ Debt-to-equity ratio: 65.35% – manageable, but something to monitor
✅ Cash reserves: $44.57 million – provides liquidity but isn’t excessive
✅ Current ratio: 1.63 – indicates solid short-term financial health

Apogee does carry some debt, with total debt sitting at $341 million. However, its strong cash flow generation ensures that it can service its obligations while still returning money to shareholders.

Profitability Metrics

• Return on equity (ROE): 20.11%, indicating strong efficiency in using capital
• Operating margin: 10.35%, showing a solid profit structure
• Net profit margin: 7.14%, demonstrating healthy profitability

Overall, Apogee appears to have a well-managed financial structure. It’s not overly leveraged, and its ability to generate cash remains strong.

Valuation and Stock Performance

At its current price of $47.57, Apogee is trading at a trailing P/E ratio of 10.64. This suggests that the stock may be undervalued compared to its historical averages. However, the stock has been on a downward trend, well below its 50-day and 200-day moving averages, reflecting concerns about slowing earnings growth.

Valuation Metrics

📌 Price-to-earnings (P/E): 10.64 – relatively low, indicating potential value
📌 Price-to-sales (P/S): 0.76 – suggests the stock is trading cheaply relative to revenue
📌 Enterprise value/EBITDA: 7.71 – fair valuation compared to historical levels

One thing to note is that Apogee’s stock has declined significantly from its 52-week high of $87.93. While this may present a buying opportunity, investors should consider whether earnings will stabilize before jumping in.

Risks and Considerations

Every investment comes with risks, and Apogee is no exception. Here are a few factors to consider before making an investment decision.

Industry-Specific Risks

• The company operates in commercial construction, a sector that can be cyclical and affected by economic downturns
• Higher interest rates could slow down construction activity, impacting revenue growth
• Commercial real estate has been under pressure, which could reduce demand for Apogee’s products

Stock Performance Risks

• The stock has been underperforming, trading well below key moving averages
• Quarterly earnings have declined, which raises questions about near-term profitability
• The stock is heavily owned by institutions (97.22%), meaning large fund activity can influence price movements

Dividend Growth Could Slow

• If earnings growth remains weak, the company may prioritize debt reduction over dividend hikes
• While the payout ratio is low, management could focus on share buybacks instead of dividend increases
• If construction spending weakens, free cash flow could come under pressure

Final Thoughts

Apogee Enterprises offers a reliable dividend that is well-supported by earnings and cash flow. While the stock doesn’t have an ultra-high yield, its payout ratio is low, leaving room for future growth. The company has a long history of steady dividend increases, and its financials remain stable despite some near-term earnings headwinds.

At current valuations, the stock appears cheap, but investors should be mindful of industry risks and the potential for earnings volatility. For those seeking a dividend-paying stock with a solid balance sheet and a history of responsible management, Apogee is worth keeping on the radar.