Atlas Corp. (NYSE:ATCO) will pay a dividend of US$0.13 on the 30th of July. This payment means that the dividend yield will be 3.6%, which is around the industry average.
View our latest analysis for Atlas
Atlas' Earnings Easily Cover the Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Atlas was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.
The next year is set to see EPS grow by 88.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.
Atlas Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. There hasn't been much of a change in the dividend over the last 10. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Dividend Growth Potential Is Shaky
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Atlas' EPS has fallen by approximately 12% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Atlas' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
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. For example, we've identified 2 warning signs for Atlas (1 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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This article by Simply Wall St is general in nature. 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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About NYSE:ATCO
Atlas
Atlas Corp. operates as an asset manager and operator of containerships.
Solid track record and good value.
