Is ATOSS Software AG (ETR:AOF) An Attractive Dividend Stock?
Today we'll take a closer look at ATOSS Software AG (ETR:AOF) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.
A 1.4% yield is nothing to get excited about, but investors probably think the long payment history suggests ATOSS Software has some staying power. That said, the recent jump in the share price will make ATOSS Software's dividend yield look smaller, even though the company prospects could be improving. Before you buy any stock for its dividend however, you should always remember Warren Buffett's two rules: 1) Don't lose money, and 2) Remember rule #1. We'll run through some checks below to help with this.
Explore this interactive chart for our latest analysis on ATOSS Software!
Payout ratios
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. In the last year, ATOSS Software paid out 75% of its profit as dividends. It's paying out most of its earnings, which limits the amount that can be reinvested in the business. This may indicate limited need for further capital within the business, or highlight a commitment to paying a dividend.
With a strong net cash balance, ATOSS Software investors may not have much to worry about in the near term from a dividend perspective.
Consider getting our latest analysis on ATOSS Software's financial position here.
Dividend Volatility
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. For the purpose of this article, we only scrutinise the last decade of ATOSS Software's dividend payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past ten-year period, the first annual payment was €0.44 in 2010, compared to €2.55 last year. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time.
It's rare to find a company that has grown its dividends rapidly over ten years and not had any notable cuts, but ATOSS Software has done it, which we really like.
Dividend Growth Potential
While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it's great to see ATOSS Software has grown its earnings per share at 14% per annum over the past five years. Earnings per share are growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why ATOSS Software is not retaining those earnings to reinvest in growth.
Conclusion
To summarise, shareholders should always check that ATOSS Software's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. ATOSS Software's payout ratio is within normal bounds. Next, growing earnings per share and steady dividend payments is a great combination. Overall, we think there are a lot of positives to ATOSS Software from a dividend perspective.
You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in ATOSS Software stock.
We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.
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.
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. Thank you for reading.
