The board of Atea ASA (OB:ATEA) has announced that it will pay a dividend of NOK3.50 per share on the 26th of November. The payment will take the dividend yield to 4.5%, which is in line with the average for the industry.
See our latest analysis for Atea
Atea's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the company was paying out 95% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Over the next year, EPS is forecast to expand by 65.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 57% which would be quite comfortable going to take the dividend forward.
Atea Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was NOK6.00, compared to the most recent full-year payment of NOK7.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.6% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth Could Be Constrained
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Atea has been growing its earnings per share at 12% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Atea's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Atea that you should be aware of before investing. Is Atea not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About OB:ATEA
Atea
Provides IT infrastructure and related solutions for businesses and public sector organizations in the Nordic countries and Baltic regions.
Excellent balance sheet, good value and pays a dividend.
