Yahoo Finance Agnico Eagle Mines (NYSE:AEM) Will Pay A Dividend Of $0.40
The board of 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 Is Paying Out More Than It Is Earning
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Agnico Eagle Mines was paying a whopping 130% as a dividend, but this only made up 31% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
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 119%, 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. Since 2013, the dividend has gone from $0.80 total annually to $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Agnico Eagle Mines has impressed us by growing EPS at 40% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Our Thoughts On Agnico Eagle Mines' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Agnico Eagle Mines' payments, as there could be some issues with sustaining them into the future. While Agnico Eagle Mines is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Agnico Eagle Mines you should be aware of, and 1 of them is significant. 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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