Is It Worth Considering AptarGroup, Inc. (NYSE:ATR) For Its Upcoming Dividend?
It looks like AptarGroup, Inc. (NYSE:ATR) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 30th of July, you won't be eligible to receive this dividend, when it is paid on the 21st of August.
AptarGroup's next dividend payment will be US$0.36 per share. Last year, in total, the company distributed US$1.44 to shareholders. Based on the last year's worth of payments, AptarGroup stock has a trailing yield of around 1.2% on the current share price of $123.29. If you buy this business for its dividend, you should have an idea of whether AptarGroup's dividend is reliable and sustainable. So we need to investigate whether AptarGroup can afford its dividend, and if the dividend could grow.
Check out our latest analysis for AptarGroup
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately AptarGroup's payout ratio is modest, at just 42% of profit. 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. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.
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 with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see AptarGroup earnings per share are up 4.0% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. AptarGroup has delivered an average of 9.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is AptarGroup worth buying for its dividend? Earnings per share growth has been modest, and it's interesting that AptarGroup is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. To summarise, AptarGroup looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Wondering what the future holds for AptarGroup? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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 editorial-team@simplywallst.com. 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.
