Stock Analysis

Here's What We Like About Autohellas' (ATH:OTOEL) Upcoming Dividend

Published
ATSE:OTOEL
Source: Shutterstock

Autohellas S.A. (ATH:OTOEL) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Autohellas' shares on or after the 5th of December will not receive the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be €1.01 per share, which looks like a nice increase on last year, when the company distributed a total of €0.46 to shareholders. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Autohellas can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Autohellas

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Autohellas paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Autohellas generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Autohellas's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Autohellas paid out over the last 12 months.

historic-dividend
ATSE:OTOEL Historic Dividend December 1st 2022

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Autohellas's earnings have been skyrocketing, up 27% per annum for the past five years. Autohellas is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Autohellas has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Autohellas got what it takes to maintain its dividend payments? It's great that Autohellas is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Autohellas looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Autohellas has 2 warning signs (and 1 which is concerning) we think you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Autohellas is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis