Yahoo Finance Agnico Eagle Mines (NYSE:AEM) Has Affirmed Its Dividend Of $0.40
Agnico Eagle Mines Limited (NYSE:AEM) has announced that it will pay a dividend of $0.40 per share on the 15th of June. This payment means that the dividend yield will be 2.8%, which is around the industry average.
Check out our latest analysis for Agnico Eagle Mines
Agnico Eagle Mines Doesn't Earn Enough To Cover Its Payments
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Agnico Eagle Mines' dividend was only 31% of earnings, however it was paying out 130% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
EPS is set to fall by 64.3% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 118%, which could put the dividend under pressure if earnings don't start to improve.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of $0.80 in 2013 to the most recent total annual payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Agnico Eagle Mines has been growing its earnings per share at 40% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Agnico Eagle Mines (1 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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