Here's What You Should Know About Atreyu Capital Markets Ltd's (TLV:ATRY) 8.0% Dividend Yield

Dividend paying stocks like Atreyu Capital Markets Ltd (TLV:ATRY) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.

In this case, Atreyu Capital Markets likely looks attractive to dividend investors, given its 8.0% dividend yield and nine-year payment history. It sure looks interesting on these metrics - but there's always more to the story. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this below.

Explore this interactive chart for our latest analysis on Atreyu Capital Markets!

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, 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. Atreyu Capital Markets paid out 112% of its profit as dividends, over the trailing twelve month period. Unless there are extenuating circumstances, from the perspective of an investor who hopes to own the company for many years, a payout ratio of above 100% is definitely a concern.

We update our data on Atreyu Capital Markets every 24 hours, so you can always get our latest analysis of its financial health, 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 Atreyu Capital Markets paid its first dividend at least nine years ago. It's good to see that Atreyu Capital Markets 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 nine-year period, the first annual payment was ₪1.8 in 2012, compared to ₪3.9 last year. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that 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.

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

With a relatively unstable dividend, it's even more important to see if earnings per share (EPS) are growing. Why take the risk of a dividend getting cut, unless there's a good chance of bigger dividends in future? It's good to see Atreyu Capital Markets has been growing its earnings per share at 10% a year over the past five years. Paying out more in dividends than was reported as profit can make sense in some cases, we would be inclined to avoid a company doing this, unless there were a solid reason.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Atreyu Capital Markets is paying out a larger percentage of its profit than we're comfortable with. We were also glad to see it growing earnings, but it was concerning to see the dividend has been cut at least once in the past. In summary, we're unenthused by Atreyu Capital Markets as a dividend stock. It's not that we think it is a bad company; it simply falls short of our criteria in some key areas.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Atreyu Capital Markets that investors should know about before committing capital to this stock.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

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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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