Is It Worth Considering Aroundtown SA (ETR:AT1) For Its Upcoming Dividend?

Readers hoping to buy Aroundtown SA (ETR:AT1) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 16th of December in order to be eligible for this dividend, which will be paid on the 18th of December.

Aroundtown's upcoming dividend is €0.14 a share, following on from the last 12 months, when the company distributed a total of €0.28 per share to shareholders. Calculating the last year's worth of payments shows that Aroundtown has a trailing yield of 4.5% on the current share price of €6.162. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Aroundtown

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Aroundtown has a low and conservative payout ratio of just 22% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Aroundtown's earnings per share have dropped 15% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, Aroundtown has lifted its dividend by approximately 20% a year on average.

Final Takeaway

Is Aroundtown an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Aroundtown looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Aroundtown for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 6 warning signs for Aroundtown that we strongly recommend you have a look at before investing in the company.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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