The South African tech company that increased its dividend for eight years in a row

Chantal Marx from FNB Wealth & Investments said that Capital Appreciation is a solid investment from a long-term perspective, offering shareholders good value.

Marx shared her views on Business Day TV’s Stock Watch following the release of Capital Appreciation’s audited consolidated financial results for the year ended 31 March 2025.

Capital Appreciation was listed on the Johannesburg Stock Exchange (JSE) as a special purpose acquisition company (SPAC) on 16 October 2015.

The businesses it invested in fall under two main divisions, software development and payment. It also has a smaller international division.

Over the last financial year, Capital Appreciation increased its revenue by 7.6%, from R1.2 billion to R1.3 billion.

The company’s software segment experienced headwinds, with revenue falling 7.6% from R594 million to R549 million.

It explained that there were problems with large customers not starting new projects within the expected timeframe. Companies are also reducing their software budgets.

These challenges resulted in lower revenues and increased costs due to being overstaffed. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell by over 30%.

Capital Appreciation achieved a strong performance within its payments segment, with revenue increasing by 22% from R567 million to R689 million.

This was mainly due to increased terminal sales and higher annuity income from its network of point-of-sale devices.

Fifty-five per cent of the payment division’s revenue comprised annuity income, a stable and predictable source of income.

Annuity income includes terminal rental income, maintenance and support fees, and transaction-related income from those terminals.

In the international division, Capital Appreciation experienced a 38% decrease in revenue due to the end of a large, multi-year contract.

The international division is the company’s smallest business, bringing in R85 million in revenue. It is still in its developmental stage and actively searches for more opportunities.

Capital Appreciation’s share price jumped by over 10%, from R1.66 to R1.84, on the release of the results.

One of Capital Appreciation’s best attributes is its consistent dividends. It reported a R0.12 dividend per share for the 2025 financial year.

This represents a very respectable dividend yield of 7.2% based on the Tuesday opening share price of R1.66.

Capital Appreciation has a strong history of dividend payments. It has not had a year of decreasing dividends since 2018.

Capital Appreciation is good long-term investment

Chantal Marx from FNB Wealth & Investments explained that Capital Appreciation is essentially a software development and payments business.

“The payments business has been growing quickly. It is focused on payment terminals, and they have a few other businesses linked to it,” she said.

“They have been innovating in terms of the terminal product they rent or sell to merchants in South Africa.”

As the digitisation of payments continues in South Africa, the technology required for this transformation will be increasingly important.

Capital Appreciation is well-positioned for this technological transformation, as its software development business supports the payment division.

Marx added that the software development division has been overstaffed for several years, but the company is right-sizing the business to achieve more sustainable margins.

Despite the staffing issue, Capital Appreciation has great intellectual property (IP) in the software development business, which bodes well for the company.

She said from a longer-term perspective, Capital Appreciation is a solid investment to have in a portfolio.

It is trading at a forward price-to-earnings (P/E) ratio of under 7, and it has a forward dividend yield of around 9%.