This high-yield ASX dividend stock is near its 52-week low – is it a buy?

This ASX dividend share might be hard to ignore for Income investors, but it comes with material risk attached.

Toll-road operator Atlas Arteria Ltd (ASX: ALX) is trading near its 52-week low at $4.87, pushing its forecast dividend yield above 8.2%. As a result, the $7 billion company sits comfortably in the top tier of Aussie dividend payers.

On the surface, the ASX 200 dividend share looks like a classic cheap and cheerful income play. Dig a little deeper, though, and the shine starts to dull.

Dividend with a warning

In a market where reliable income is getting harder to find, that sort of yield can make even cautious investors start doing mental maths. But as always, the real story isn’t the size of the dividend, it’s whether it can last.

First, that headline yield comes with a warning label. The ASX dividend share is paying out more in dividends than it generates in reported earnings. That’s not automatically fatal – infrastructure stocks often smooth income over time – but it does raise eyebrows.

When payouts consistently outstrip profits, the margin for error shrinks fast. Investors may be enjoying generous cheques today, but they’re doing so without a thick earnings cushion underneath.

Wobbling cash flows

Then there’s the business of the ASX dividend share itself. Atlas Arteria owns toll roads across France, Germany and the United States. These are assets that are long-life, inflation-linked and generally predictable. But predictable doesn’t mean immune.

Traffic volumes, interest rates, inflation and political decisions all feed into earnings. In calm conditions, toll roads hum along nicely. In rougher macro environments, cash flows can wobble and dividends are often the first thing analysts put under the microscope.

Finally, the share price tells its own story. Atlas Arteria hovering close to a year low suggests the market is either baking in higher risk or rotating away from yield-heavy stocks altogether. Sometimes that creates opportunity. Other times, it’s a quiet warning that investors should tread carefully.

So where does that leave income seekers?

If you’re a yield chaser with a strong stomach and a long-term view on toll-road resilience, this ASX dividend share might look interesting at these levels. But if you prioritise dependable, well-covered income over eye-catching yields, this could be a case of spectacle over substance.

The analysts‘ view on Atlas Arteria is also mixed, with most of them seeing the toll-operator as a hold. The average 12-month price target is set at $5.26, which suggests an 8% upside.

The most optimistic broker predicts a potential plus of 21%, while the most pessimistic one sees a possible loss of 3%.

The post This high-yield ASX dividend stock is near its 52-week low – is it a buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Marc Van Dinther has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.