ATN International, Inc. (NASDAQ:ATNI) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, ATN International investors that purchase the stock on or after the 31st of March will not receive the dividend, which will be paid on the 7th of April.

The company's next dividend payment will be US$0.24 per share. Last year, in total, the company distributed US$0.96 to shareholders. Looking at the last 12 months of distributions, ATN International has a trailing yield of approximately 4.5% on its current stock price of US$21.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. ATN International reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 86% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

See our latest analysis for ATN International

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. ATN International reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. ATN International's dividend payments per share have declined at 1.2% per year on average over the past 10 years, which is uninspiring.

We update our analysis on ATN International every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid ATN International? It's hard to get used to ATN International paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering ATN International as an investment, you'll find it beneficial to know what risks this stock is facing. For example, ATN International has 2 warning signs (and 1 which is concerning) we think you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.