Atea's (OB:ATEA) Dividend Will Be NOK3.50

Atea ASA (OB:ATEA) will pay a dividend of NOK3.50 on the 26th of November. The payment will take the dividend yield to 4.8%, which is in line with the average for the industry.

See our latest analysis for Atea

Atea's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to rise by 65.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Atea Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was NOK6.00, compared to the most recent full-year payment of NOK7.00. This means that it has been growing its distributions at 1.6% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Atea has impressed us by growing EPS at 12% 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.

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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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