Atlas Copco (STO:ATCO A) Is Due To Pay A Dividend Of SEK1.40

Atlas Copco AB's (STO:ATCO A) investors are due to receive a payment of SEK1.40 per share on 24th of October. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

View our latest analysis for Atlas Copco

Atlas Copco's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Atlas Copco was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 26.6% over the next year. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

Atlas Copco Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of SEK1.38 in 2014 to the most recent total annual payment of SEK2.80. This implies that the company grew its distributions at a yearly rate of about 7.4% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Atlas Copco has seen EPS rising for the last five years, at 12% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Atlas Copco's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 19 analysts we track are forecasting for Atlas Copco for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.