ATCO (TSE:ACO.X) Is Increasing Its Dividend To CA$0.4898

ATCO Ltd. (TSE:ACO.X) will increase its dividend from last year's comparable payment on the 31st of March to CA$0.4898. This makes the dividend yield about the same as the industry average at 5.4%.

See our latest analysis for ATCO

ATCO's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by ATCO's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 1.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 57%, which we are pretty comfortable with and we think is feasible on an earnings basis.

ATCO Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.75 in 2014 to the most recent total annual payment of CA$1.96. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. ATCO has seen EPS rising for the last five years, at 14% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like ATCO's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for ATCO that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.