NYSE:AEM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 28th of August will not receive this dividend, which will be paid on the 15th of September.” data-reactid=”28″ type=”text”>Readers hoping to buy Agnico Eagle Mines Limited (NYSE:AEM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 28th of August will not receive this dividend, which will be paid on the 15th of September.
Agnico Eagle Mines’s next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Calculating the last year’s worth of payments shows that Agnico Eagle Mines has a trailing yield of 1.0% on the current share price of $79.5. If you buy this business for its dividend, you should have an idea of whether Agnico Eagle Mines’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Agnico Eagle Mines’s payout ratio is modest, at just 34% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The company paid out 93% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect – but we’d generally want look more closely here.
Agnico Eagle Mines paid out less in dividends than it reported in profits, but unfortunately it didn’t generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Agnico Eagle Mines’s ability to maintain its dividend.
here to see the company’s payout ratio, plus analyst estimates of its future dividends.” data-reactid=”37″ type=”text”>Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s encouraging to see Agnico Eagle Mines has grown its earnings rapidly, up 37% a year for the past five years. Earnings have been growing quickly, but we’re concerned dividend payments consumed most of the company’s cash flow over the past year.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Agnico Eagle Mines has increased its dividend at approximately 16% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
To Sum It Up
Is Agnico Eagle Mines an attractive dividend stock, or better left on the shelf? We’re glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it’s not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it’s not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
2 warning signs we think you should be aware of.” data-reactid=”59″ type=”text”>While it’s tempting to invest in Agnico Eagle Mines for the dividends alone, you should always be mindful of the risks involved. For example – Agnico Eagle Mines has 2 warning signs we think you should be aware of.
a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.” data-reactid=”60″ type=”text”>A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.