In This Article:
Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past 10 years ATCO Ltd (TSX:ACO.X) has returned an average of 2.00% per year to investors in the form of dividend payouts. Does ATCO tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for ATCO
Here’s how I find good dividend stocks
When researching a dividend stock, I always follow the following screening criteria:
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Is it paying an annual yield above 75% of dividend payers?
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Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
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Has dividend per share risen in the past couple of years?
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Does earnings amply cover its dividend payments?
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Will it have the ability to keep paying its dividends going forward?
How does ATCO fare?
ATCO has a trailing twelve-month payout ratio of 77.69%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of ACO.X it has increased its DPS from CA$0.47 to CA$1.51 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock. In terms of its peers, ATCO produces a yield of 3.81%, which is on the low-side for Integrated Utilities stocks.
Next Steps:
Considering the dividend attributes we analyzed above, ATCO is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three key aspects you should further examine:
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Future Outlook: What are well-informed industry analysts predicting for ACO.X’s future growth? Take a look at our free research report of analyst consensus for ACO.X’s outlook.
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Valuation: What is ACO.X worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ACO.X is currently mispriced by the market.
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Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.