Atlas Copco (STO:ATCO A) Will Pay A Larger Dividend Than Last Year At SEK1.50

Atlas Copco AB (publ) (STO:ATCO A) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of May to SEK1.50. Even though the dividend went up, the yield is still quite low at only 1.7%.

Atlas Copco's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. 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.

The next year is set to see EPS grow by 21.2%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Atlas Copco

Atlas Copco Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of SEK1.38 in 2015 to the most recent total annual payment of SEK3.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Atlas Copco has been growing its earnings per share at 12% a year over the past five years. 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 17 Atlas Copco analysts we track are forecasting continued growth with our free report on 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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