Yahoo Finance Lundin Mining (TSE:LUN) Will Pay A Dividend Of $0.09
The board of Lundin Mining Corporation (TSE:LUN) has announced that it will pay a dividend of $0.09 per share on the 21st of June. The dividend yield will be 4.1% based on this payment which is still above the industry average.
Check out our latest analysis for Lundin Mining
Lundin Mining Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Lundin Mining's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. This is a pretty unsustainable practice, and could be risky if continued for the long term.
Over the next year, EPS is forecast to expand by 36.8%. If the dividend continues on its recent course, the payout ratio in 12 months could be 114%, which is a bit high and could start applying pressure to the balance sheet.
Lundin Mining Doesn't Have A Long Payment History
It is great to see that Lundin Mining has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.0882 in 2017 to the most recent total annual payment of $0.34. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Lundin Mining has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lundin Mining's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Lundin Mining has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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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