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ATOSS Software AG (ETR:AOF) will increase its dividend from last year's comparable payment on the 4th of May to €2.83. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.
View our latest analysis for ATOSS Software
ATOSS Software's Earnings Easily Cover The Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, ATOSS Software's dividend made up quite a large proportion of earnings but only 58% of free cash flows. This leaves plenty of cash for reinvestment into the business.
Over the next year, EPS is forecast to expand by 106.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
ATOSS Software Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of €0.355 in 2013 to the most recent total annual payment of €1.83. This means that it has been growing its distributions at 18% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Dividend Growth Could Be Constrained
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that ATOSS Software has grown earnings per share at 16% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 ATOSS Software analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is ATOSS Software not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.