Atlas Copco (STO:ATCO A) Will 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. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Atlas Copco

Atlas Copco's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Atlas Copco's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 23.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

Atlas Copco Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was SEK1.38 in 2014, and the most recent fiscal year payment was SEK2.80. This means that it has been growing its distributions at 7.4% per annum over that time. 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 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. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Atlas Copco Looks Like A Great Dividend Stock

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. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. Is Atlas Copco 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.