Atlas Copco's (STO:ATCO A) Upcoming Dividend Will Be Larger Than Last Year's

Atlas Copco AB (STO:ATCO A) will increase its dividend from last year's comparable payment on the 2nd of May to SEK1.40. Despite this raise, the dividend yield of 1.5% is only a modest boost to shareholder returns.

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. The last dividend was quite easily covered by Atlas Copco's 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 19.3%. 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 a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from SEK1.38 total annually to SEK2.80. This means that it has been growing its distributions at 7.4% per annum 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. Atlas Copco has impressed us by growing EPS 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.

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. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.