Atrion Corporation (NASDAQ:ATRI) Stock Goes Ex-Dividend In Just Four Days

Readers hoping to buy Atrion Corporation (NASDAQ:ATRI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 14th of September will not receive the dividend, which will be paid on the 30th of September.

Atrion's next dividend payment will be US$1.75 per share. Last year, in total, the company distributed US$6.20 to shareholders. Last year's total dividend payments show that Atrion has a trailing yield of 1.1% on the current share price of $635.06. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Atrion

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Atrion's payout ratio is modest, at just 33% of profit. A useful secondary check can be to evaluate whether Atrion generated enough free cash flow to afford its dividend. Over the last year it paid out 62% of its free cash flow as dividends, within the usual range 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 how much of its profit Atrion paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Atrion, with earnings per share up 6.0% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Atrion has lifted its dividend by approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Atrion got what it takes to maintain its dividend payments? Earnings per share have been growing at a steady rate, and Atrion paid out less than half its profits and more than half its free cash flow as dividends over the last year. In summary, it's hard to get excited about Atrion from a dividend perspective.

Want to learn more about Atrion's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.

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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