Last update on 2024-06-27

ATOSS Software (AOF.DE) - Dividend Analysis (Final Score: 4/8)

ATOSS Software (AOF.DE) dividend analysis, scoring 4/8 in stability and performance based on an 8-criteria system. Find out if it's a reliable dividend stock.

Short Analysis - Dividend Score: 4

We're running ATOSS Software (AOF.DE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

We evaluated ATOSS Software (AOF.DE) using an 8-criteria system to assess its dividend policy's performance and stability. ATOSS received a score of 4 out of 8. Here's a breakdown: 1. **Dividend Yield**: ATOSS has a low dividend yield of 0.4785%, below the industry average of 0.79%. Its yield has fluctuated greatly over the years. 2. **Dividend Growth Rate**: The company's 20-year growth rate is not specified but implies instability. 3. **Payout Ratio**: The average payout ratio over 20 years is 148.04%, much higher than the sustainable 65%, indicating potential financial instability. 4. **Earnings Coverage**: No specific ratio given, but the text suggests concern over adequate earnings to cover dividends. 5. **Cash Flow Coverage**: Only three years showed a coverage ratio above 1.0, indicating unreliable dividend sustainability. 6. **Stable Dividends**: The dividends have been unstable, with significant drops over the years. 7. **Long-term Track Record**: ATOSS has a 19-year history of paying dividends, short of the 25-year benchmark. 8. **Stock Repurchases**: Rare and inconsistent over 20 years, signaling less focus on returning value through buybacks.

Insights for Value Investors Seeking Stable Income

Based on the analysis, ATOSS Software (AOF.DE) presents several red flags for income-focused investors. Those seeking reliable and stable dividends might want to consider other options given the company's lower-than-average yield, high payout ratio, and inconsistent dividend history. However, if you're interested in growth potential and can tolerate volatility, ATOSS might still be worth a closer look. Proceed with caution and consider diversifying your investments.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is the ratio of a company's annual dividend compared to its share price. This metric is crucial as it indicates how much cash flow an investor is getting for each dollar invested in an equity position. A higher dividend yield can be attractive to investors seeking regular income from their investments.

ATOSS Software's current dividend yield of 0.4785% is notably lower than the industry average of 0.79%. Over the past 20 years, ATOSS Software's dividend yield has seen significant volatility, peaking at an astonishing 107.2125% in 2006 before tapering off to current levels. This variability stems mainly from irregular dividend payouts and fluctuation in stock price, which closed at €209 in 2023—a considerable rise from €7.75 in 2003. Although consistent dividend payouts can indicate financial stability and investor confidence, ATOSS Software's lower-than-average dividend yield might not appeal to income-focused investors, especially when juxtaposed with the more stable industry average.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for ATOSS Software (AOF.DE) and why it is important to consider

Dividend Growth Rate refers to the annualized percentage rate of growth of a company's dividend payments. Investors often seek companies with a stable or growing dividend, as it can be an indicator of financial health and shareholder value. A Dividend Growth Rate higher than 5% over a long period, such as 20 years, can indicate a company’s ability to generate consistent returns and its commitment to returning capital to shareholders.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio measures the percentage of a company's earnings paid out as dividends. A sustainable payout ratio is generally considered to be below 65%.

The average payout ratio for ATOSS Software (AOF.DE) over the last 20 years is approximately 148.04%, which is significantly above the 65% threshold. This indicates that the company has frequently been paying out more in dividends than it earns, which is not sustainable in the long run. Individual years, such as 2013 with a payout ratio of 953.38% and 2004 with 695.09%, greatly skew this average. However, even with these outliers, the majority of the years still exhibit payout ratios above 65%, suggesting a trend that might be concerning for dividend sustainability. This trend is generally considered bad for the given criterion as it signifies potential future financial instability if not corrected.

Dividends Well Covered by Earnings?

Coverage Ratio

The 'dividends covered by earnings' ratio helps investors analyze the reliability and safety of a company's dividend. A ratio above 1 indicates that profits are sufficient to cover dividends, which is a favorable situation. Conversely, a ratio below 1 poses risk as dividends exceed earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is an important criterion to assess the sustainability of a company's dividend payouts. Free cash flow represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. It is crucial to consider because it provides an insight into whether the company generates enough cash to cover its dividends.

ATOSS Software's history shows varying degrees of dividend coverage by free cash flow. Over the past two decades, the company maintained a dividend coverage ratio higher than 1.0 thrice: in 2013 (1.87), 2016 (1.00), and 2019 (1.11), indicating strong cash flow relative to dividends in those years. However, in most other years, the coverage ratio dipped below 1.0, and at times significantly. For instance, in 2020, the ratio was at 0.45, suggesting that the dividends were not sufficiently covered by the free cash flow. This indicates variability and potential risk in the sustainability of the dividend payments. Investors generally look for a ratio consistently above 1.0 for confidence in the sustainability.

Stable Dividends Since the Company Began Paying Dividends?

The criterion examines the stability of dividend payments over a 20-year period. A 20% drop in dividends indicates potential risks for income-focused investors.

ATOSS Software's dividend history from 2003 to 2023 shows significant fluctuations, notably a drop from 0.75 in 2004 to 0.11 in 2005 and from 5.5 in 2006 to 0.24 in 2007, failing to provide stable dividends for income-seeking investors.

Dividends Paid for Over 25 Years?

One criterion for determining the reliability and consistency of dividend payments by a company is whether it has been paying dividends for over 25 years. Companies with a long history of dividend payments demonstrate a commitment to returning capital to shareholders, suggesting stable and efficient management.

Based on the provided dividend per share data for ATOSS Software (AOF.DE) spanning from 2002 to 2023, it is clear that the company has not been paying dividends for over 25 years. The history reveals that dividends weren't paid before 2004, so they have a track record of paying dividends for 19 years. While this is a commendable period and indicates a steady engagement in returning value to shareholders, it falls short of the 25-year benchmark often used to consider a company as having a long-standing dividend history. Therefore, while this track record is good, it does not fully meet the criterion.

Reliable Stock Repurchases Over the Past 20 Years?

This criterion examines whether a company has consistently repurchased its own shares over a significant period, such as the past 20 years. Reliable stock repurchases can signal a company's confidence in its financial stability and future prospects. Share repurchases can also enhance shareholder value by reducing the amount of shares outstanding, thus increasing earnings per share (EPS) and potentially the stock price.

ATOSS Software (AOF.DE) has shown only three instances of stock repurchasing activity in the past 20 years: 2006, 2009, and 2010. The average repurchase rate over this period is -0.1037, indicating a slight decline in the number of shares outstanding. This infrequent activity suggests that the company does not consistently engage in stock buybacks. It could imply that the company prioritizes other financial strategies or doesn't have periods of excessive liquidity to return to shareholders in the form of buybacks. Consistent repurchases might be viewed more favorably by investors looking for steady EPS growth and cash returns.