Atlas Copco (STO:ATCO A) Has Affirmed Its Dividend Of SEK1.15

Atlas Copco AB (STO:ATCO A) has announced that it will pay a dividend of SEK1.15 per share on the 5th of May. This means the dividend yield will be fairly typical at 1.8%.

View our latest analysis for Atlas Copco

Atlas Copco Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Atlas Copco's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Earnings per share is forecast to rise by 12.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 193%, which probably can't continue without putting some pressure on the balance sheet.

Atlas Copco Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was SEK1.25, compared to the most recent full-year payment of SEK2.30. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Atlas Copco has seen EPS rising for the last five years, at 13% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Atlas Copco Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 21 Atlas Copco analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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