Ann: APA Pilbara Energy System - Investor Site Visit Presentation, page-20

"APA has increased its dividend every year since it floated way back in the 2000's.
What's not to like."

Historically, the capital of shareholders would have been invested at superior rates of return, which is what would have informed the historical dividend growth.

However, one very important thing that is not to be liked is if the capital of the business that isn't being returned to shareholders, is currently being invested at rates of return that are below the company's cost of capital + some sort of risk premium.

If that's the view that is being taken by the market, it would explain APA's share price being at decade-lows.

So, it's a bit of a binary investment consideration:

1. The stock is fundamentally undervalued and therefore a BUY,
2. Poor capital allocation is occurring, in which the case the stock is a value trap.

Trouble is, we'll only be able to know the answer in years to come.

But what we are able to know now is that the market dislikes uncertainty.

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