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Anglo Asian Mining PLC (LON:AAZ) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 2nd of July in order to receive the dividend, which the company will pay on the 30th of July.
Anglo Asian Mining's next dividend payment will be UK£0.045 per share, and in the last 12 months, the company paid a total of UK£0.08 per share. Based on the last year's worth of payments, Anglo Asian Mining has a trailing yield of 4.7% on the current stock price of £1.37. If you buy this business for its dividend, you should have an idea of whether Anglo Asian Mining's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Anglo Asian Mining's payout ratio is modest, at just 47% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 43% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Anglo Asian Mining has grown its earnings rapidly, up 74% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last two years, Anglo Asian Mining has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Is Anglo Asian Mining an attractive dividend stock, or better left on the shelf? We love that Anglo Asian Mining is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Anglo Asian Mining looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Anglo Asian Mining is facing. Case in point: We've spotted 2 warning signs for Anglo Asian Mining you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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