On the 10 June 2019, Atmos Energy Corporation (NYSE:ATO) will be paying shareholders an upcoming dividend amount of US$0.53 per share. However, investors must have bought the company's stock before 24 May 2019 in order to qualify for the payment. That means you have only 3 days left! Is this future income a persuasive enough catalyst for investors to think about Atmos Energy as an investment today? Below, I'm going to look at the latest data and analyze the stock and its dividend property in further detail.
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5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Atmos Energy pass our checks?
The current trailing twelve-month payout ratio for the stock is 48%, which means that the dividend is covered by earnings. Going forward, analysts expect ATO's payout to remain around the same level at 49% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.2%. In addition to this, EPS should increase to $4.48.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliability is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of ATO it has increased its DPS from $1.32 to $2.1 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes ATO a true dividend rockstar.
Relative to peers, Atmos Energy produces a yield of 2.0%, which is on the low-side for Gas Utilities stocks.
Keeping in mind the dividend characteristics above, Atmos Energy is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I've compiled three relevant factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for ATO’s future growth? Take a look at our free research report of analyst consensus for ATO’s outlook.
- Historical Performance: What has ATO's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.