Should Caledonia Mining Corporation Plc (TSE:CAL) Be Part Of Your Portfolio?
Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. In the past 5 years Caledonia Mining Corporation Plc (TSX:CAL) has returned an average of 6.00% per year to investors in the form of dividend payouts. Does Caledonia Mining tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View our latest analysis for Caledonia Mining
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it the top 25% annual dividend yield payer?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has it increased its dividend per share amount over the past?
Can it afford to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
How well does Caledonia Mining fit our criteria?
The current trailing twelve-month payout ratio for the stock is 31.79%, which means that the dividend is covered by earnings. However, going forward, analysts expect CAL’s payout to fall to 12.21% of its earnings, which leads to a dividend yield of around 3.97%. However, EPS should increase to $1.51, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Caledonia Mining as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Caledonia Mining has a yield of 3.78%, which is high for Metals and Mining stocks but still below the market’s top dividend payers.
Next Steps:
Taking all the above into account, Caledonia Mining is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for CAL’s future growth? Take a look at our free research report of analyst consensus for CAL’s outlook.
Valuation: What is CAL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CAL is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
