AptarGroup, Inc. (NYSE:ATR) Passed Our Checks, And It's About To Pay A US$0.38 Dividend
It looks like AptarGroup, Inc. (NYSE:ATR) is about to go ex-dividend in the next 2 days. Investors can purchase shares before the 27th of April in order to be eligible for this dividend, which will be paid on the 19th of May.
AptarGroup's next dividend payment will be US$0.38 per share. Last year, in total, the company distributed US$1.44 to shareholders. Looking at the last 12 months of distributions, AptarGroup has a trailing yield of approximately 1.0% on its current stock price of $151.45. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether AptarGroup can afford its dividend, and if the dividend could grow.
See our latest analysis for AptarGroup
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see AptarGroup paying out a modest 43% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Thankfully its dividend payments took up just 29% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that AptarGroup's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about AptarGroup's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AptarGroup has delivered an average of 7.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
Has AptarGroup got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. Generally we like to see both low payout ratios and strong earnings per share growth, but AptarGroup is halfway there. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in AptarGroup for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for AptarGroup that you should be aware of before investing in their shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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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