Atlas Corp. (NYSE:ATCO) will pay a dividend of US$0.13 on the 31st of January. The dividend yield is 3.5% based on this payment, which is a little bit low compared to the other companies in the industry.
View our latest analysis for Atlas
Atlas' Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. 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 120.0%. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.
Atlas Has A Solid Track Record
The company has an extended history of paying stable dividends. The most recent annual payment of US$0.50 is about the same as the first annual payment 10 years ago. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
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. Atlas has seen EPS rising for the last five years, at 33% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Atlas is not retaining those earnings to reinvest in growth.
Our Thoughts On Atlas' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Atlas is a great stock to add to your portfolio if income is your focus.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Atlas you should be aware of, and 1 of them doesn't sit too well with us. We have also put together a list of global stocks with a solid dividend.
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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.
About NYSE:ATCO
Atlas
Atlas Corp. operates as an asset manager and operator of containerships.
Solid track record and good value.
