Atlas Copco's (STO:ATCO A) Dividend Will Be Increased To SEK1.40

Atlas Copco AB (STO:ATCO A) will increase its dividend from last year's comparable payment on the 2nd of May to SEK1.40. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.

View our latest analysis for Atlas Copco

Atlas Copco's Payment Has Solid Earnings Coverage

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

Over the next year, EPS is forecast to expand by 14.9%. 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 an extended history of paying stable dividends. 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 dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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. We are encouraged to see that Atlas Copco has grown earnings per share at 12% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 20 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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