Atea (OB:ATEA) Will Pay A Dividend Of NOK3.50

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. This makes the dividend yield 5.1%, which is above the industry average.

Check out our latest analysis for Atea

Atea'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. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. 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 57.2%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 65% which would be quite comfortable going to take the dividend forward.

Atea Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

There Isn't Much Room To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Atea has grown earnings per share at 9.4% per year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Atea's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Atea will make a great income stock. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Atea is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for Atea that investors should take into consideration. Is Atea not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.