ATC CARGO (WSE:ATA) Has Announced That It Will Be Increasing Its Dividend To PLN2.00

The board of ATC CARGO S.A. (WSE:ATA) has announced that it will be increasing its dividend by 135% on the 21st of July to PLN2.00, up from last year's comparable payment of PLN0.85. This takes the annual payment to 5.0% of the current stock price, which unfortunately is below what the industry is paying.

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ATC CARGO's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, ATC CARGO's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, could fall by 5.9% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 75%, meaning that most of the company's earnings is being paid out to shareholders.

See our latest analysis for ATC CARGO

ATC CARGO's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the annual payment back then was PLN0.46, compared to the most recent full-year payment of PLN0.85. This means that it has been growing its distributions at 17% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth Is Doubtful

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. ATC CARGO has seen earnings per share falling at 5.9% per year over the last three years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On ATC CARGO's Dividend

In summary, while it's always good to see the dividend being raised, we don't think ATC CARGO's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for ATC CARGO (1 shouldn't be ignored!) that you should be aware of before investing. Is ATC CARGO 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.