AT & S Austria Technologie & Systemtechnik's (VIE:ATS) Shareholders Will Receive A Bigger Dividend Than Last Year

By
Simply Wall St
Published
May 28, 2021
WBAG:ATS
Source: Shutterstock

AT & S Austria Technologie & Systemtechnik Aktiengesellschaft (VIE:ATS) has announced that it will be increasing its dividend on the 29th of July to €0.39. This takes the annual payment to 1.3% of the current stock price, which is about average for the industry.

View our latest analysis for AT & S Austria Technologie & Systemtechnik

AT & S Austria Technologie & Systemtechnik's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, AT & S Austria Technologie & Systemtechnik's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 114.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
WBAG:ATS Historic Dividend May 29th 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the first annual payment was €0.10, compared to the most recent full-year payment of €0.39. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. 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.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, AT & S Austria Technologie & Systemtechnik's earnings per share has shrunk at approximately 6.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think AT & S Austria Technologie & Systemtechnik's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, AT & S Austria Technologie & Systemtechnik has 3 warning signs (and 2 which are significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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