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The board of Alta Equipment Group Inc. (NYSE:ALTG) has announced that it will pay a dividend on the 30th of May, with investors receiving $0.057 per share. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Alta Equipment Group's stock price has reduced by 39% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
Alta Equipment Group's Distributions May Be Difficult To Sustain
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Even though Alta Equipment Group is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
Analysts expect the EPS to grow by 57.7% over the next 12 months. The company seems to be going down the right path, but it will take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.
Check out our latest analysis for Alta Equipment Group
Alta Equipment Group Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The payments haven't really changed that much since 3 years ago. Alta Equipment Group hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Company Could Face Some Challenges Growing The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Alta Equipment Group has been growing its earnings per share at 48% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.
Alta Equipment Group's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Strong earnings growth means Alta Equipment Group has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.