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

Atlas Copco AB (STO:ATCO A) will pay a dividend of SEK1.40 on the 24th of October. Even though the dividend went up, the yield is still quite low at only 1.4%.

View our latest analysis for Atlas Copco

Atlas Copco's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Atlas Copco's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 25.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

Atlas Copco 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. The annual payment during the last 10 years was SEK1.38 in 2014, and the most recent fiscal year payment was SEK2.80. This implies that the company grew its distributions at a yearly rate of about 7.4% 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 12% 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.

We Really Like Atlas Copco's Dividend

Overall, a dividend increase is always good, and we think that Atlas Copco is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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.

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