Aroundtown's (ETR:AT1) Dividend Will Be Increased To €0.23

Aroundtown SA (ETR:AT1) will increase its dividend on the 4th of July to €0.23. This will take the dividend yield from 5.3% to 5.3%, providing a nice boost to shareholder returns.

View our latest analysis for Aroundtown

Aroundtown's Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by Aroundtown's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 27.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Aroundtown's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the first annual payment was €0.16, compared to the most recent full-year payment of €0.23. This implies that the company grew its distributions at a yearly rate of about 9.0% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Aroundtown's EPS has fallen by approximately 14% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Aroundtown's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 5 warning signs for Aroundtown you should be aware of, and 2 of them are significant. 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.