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The board of Altius Minerals Corporation (TSE:ALS) has announced that it will be increasing its dividend on the 15th of September to CA$0.07. Even though the dividend went up, the yield is still quite low at only 1.3%.
Altius Minerals Might Find It Hard To Continue The Dividend
If it is predictable over a long period, even low dividend yields can be attractive. Altius Minerals is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.
Over the next year, EPS could expand by 41.2% if recent trends continue. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The positive free cash flows give us some comfort, however, that the dividend could continue to be sustained.
Altius Minerals Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2015, the first annual payment was CA$0.08, compared to the most recent full-year payment of CA$0.28. This means that it has been growing its distributions at 23% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Company Could Face Some Challenges Growing The Dividend
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Altius Minerals has been growing its earnings per share at 41% a year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If the company can turn a profit relatively soon, we can see this becoming a reliable income stock.
Our Thoughts On Altius Minerals' Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 2 warning signs for Altius Minerals you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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