Atlantic Grupa d.d's (ZGSE:ATGR) Dividend Will Be Increased To €1.50

Atlantic Grupa d.d.'s (ZGSE:ATGR) periodic dividend will be increasing on the 3rd of July to €1.50, with investors receiving 25% more than last year's €1.20. This makes the dividend yield 2.8%, which is above the industry average.

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Atlantic Grupa d.d's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Atlantic Grupa d.d's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 32.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 75%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Atlantic Grupa d.d

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from €0.343 total annually to €1.20. This means that it has been growing its distributions at 13% per annum 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.

The Dividend Has Limited Growth Potential

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. Atlantic Grupa d.d's EPS has fallen by approximately 15% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

Atlantic Grupa d.d's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Atlantic Grupa d.d will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Atlantic Grupa d.d is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Atlantic Grupa d.d that investors should take into consideration. Is Atlantic Grupa d.d not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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