Top Dividend Stocks – Why You Might Be Interested In AptarGroup, Inc. (NYSE:ATR) For Its Upcoming Dividend
AptarGroup, Inc. (NYSE:ATR) stock is about to trade ex-dividend in 2 days. Ex-dividend means that investors that purchase the stock on or after the 27th of April will not receive this dividend, which will be paid on the 19th of May.
AptarGroup’s next dividend payment will be US$0.38 per share, and in the last 12 months, the company paid a total of US$1.44 per share. 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 an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. AptarGroup paid out a comfortable 43% of its profit last year. A useful secondary check can be to evaluate whether AptarGroup generated enough free cash flow to afford its dividend. It distributed 29% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
NYSE:ATR Historic Dividend April 24th 2021
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we’re not enthused to see that AptarGroup’s earnings per share have remained effectively flat 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. Earnings per share growth in recent times has not been a standout. 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.
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 7.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
From a dividend perspective, should investors buy or avoid AptarGroup? Earnings per share have been flat over this time, but we’re intrigued to see that AptarGroup is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and AptarGroup is halfway there. It’s a promising combination that should mark this company worthy of closer attention.
So while AptarGroup looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. For example – AptarGroup has 1 warning sign we think you should be aware of.
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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