In the Safety Net column, I usually cover popular stocks that have big yields. Lots of people are invested and/or interested in these household names, so grading these stocks is a sure bet to make readers happy.
However, once in a while, I like to introduce you to a stock you’ve probably never heard of that nevertheless pays a strong dividend. After all, today’s unknown could be tomorrow’s Perpetual Dividend Raiser.
With that in mind, let’s take a look at Autoscope Technologies (Nasdaq: AATC). Its main business is technology that collects and analyzes traffic data to improve travel efficiency and driver safety.
The reason you’ve never heard of Autoscope Technologies is it has a tiny $32 million market cap and trades just 17,000 or so shares a day.
The company pays a $0.12 per share quarterly dividend, which comes out to an 8.6% yield.
It only began paying a dividend last May.
Over the past 12 months, free cash flow was $2.3 million. The three dividends paid so far totaled $1.29 million. If we annualize that figure, it comes out to $1.7 million for a payout ratio of 74% – just under my 75% limit.
Over the past 12 months, free cash flow was flat with 2020’s total but up significantly from 2019’s.
No analysts cover the stock, so there are no cash flow estimates. Since cash flow has been flat over the past four quarters, we’ll assume the same will continue going forward. If Autoscope Technologies increases its cash flow while keeping the dividend the same, we could see an upgrade to the dividend’s safety rating.
The company has $8.5 million in cash and $115,000 in debt, so that’s not a concern.
So to summarize, we don’t yet have a clear picture of Autoscope Technologies’ financial performance. There are no estimates, and management has not offered guidance. Should free cash flow dip or the payout ratio go above my comfort limit of 75%, I’ll get concerned. If the situation stays the same, Autoscope Technologies should be able to continue to pay its current 8.6% yield.
At this point, you can’t consider the dividend safe. There just isn’t enough information. But I suspect the dividend isn’t in imminent danger of a cut. We’ll have to see what the financials for the next few quarters look like.
Dividend Safety Rating: C
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