Stock Analysis

How Does Atlantic Grupa d.d. (ZGSE:ATGR) Fare As A Dividend Stock?

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ZGSE:ATGR
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Could Atlantic Grupa d.d. (ZGSE:ATGR) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. Yet sometimes, investors buy a popular dividend stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

Investors might not know much about Atlantic Grupa d.d's dividend prospects, even though it has been paying dividends for the last eight years and offers a 1.7% yield. While the yield may not look too great, the relatively long payment history is interesting. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this below.

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historic-dividend
ZGSE:ATGR Historic Dividend April 29th 2021

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Atlantic Grupa d.d paid out 24% of its profit as dividends, over the trailing twelve month period. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.

In addition to comparing dividends against profits, we should inspect whether the company generated enough cash to pay its dividend. Atlantic Grupa d.d's cash payout ratio last year was 25%, which is quite low and suggests that the dividend was thoroughly covered by cash flow. It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Consider getting our latest analysis on Atlantic Grupa d.d's financial position here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the last decade of data, we can see that Atlantic Grupa d.d paid its first dividend at least eight years ago. It's good to see that Atlantic Grupa d.d has been paying a dividend for a number of years. However, the dividend has been cut at least once in the past, and we're concerned that what has been cut once, could be cut again. During the past eight-year period, the first annual payment was Kn9.0 in 2013, compared to Kn25.0 last year. Dividends per share have grown at approximately 14% per year over this time. The growth in dividends has not been linear, but the CAGR is a decent approximation of the rate of change over this time frame.

Atlantic Grupa d.d has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, but it might be worth considering if the business has turned a corner.

Dividend Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Atlantic Grupa d.d has grown its earnings per share at 7.2% per annum over the past five years. A low payout ratio and strong historical earnings growth suggests Atlantic Grupa d.d has been effectively reinvesting in its business. We think this generally bodes well for its dividend prospects.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. Firstly, we like that Atlantic Grupa d.d has low and conservative payout ratios. Second, earnings growth has been ordinary, and its history of dividend payments is chequered - having cut its dividend at least once in the past. Overall we think Atlantic Grupa d.d is an interesting dividend stock, although it could be better.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Atlantic Grupa d.d for free with public analyst estimates for the company.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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About ZGSE:ATGR

Atlantic Grupa d.d

Atlantic Grupa d.d., together with its subsidiaries, engages in the research, development, production, and distribution fast moving consumer goods in Southeast Europe, the European markets, Russia, and the Commonwealth of Independent States.

Flawless balance sheet second-rate dividend payer.