Is Allgemeine Gold- und Silberscheideanstalt AG (MUN:AGS) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.
With a six-year payment history and a 3.8% yield, many investors probably find Allgemeine Gold- und Silberscheideanstalt intriguing. We'd agree the yield does look enticing. Some simple research can reduce the risk of buying Allgemeine Gold- und Silberscheideanstalt for its dividend - read on to learn more.
Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Looking at the data, we can see that 57% of Allgemeine Gold- und Silberscheideanstalt's profits were paid out as dividends in the last 12 months. A payout ratio above 50% generally implies a business is reaching maturity, although it is still possible to reinvest in the business or increase the dividend over time.
While the above analysis focuses on dividends relative to a company's earnings, we do note Allgemeine Gold- und Silberscheideanstalt's strong net cash position, which will let it pay larger dividends for a time, should it choose.
We update our data on Allgemeine Gold- und Silberscheideanstalt every 24 hours, so you can always get our latest analysis of its financial health, here.
From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. Allgemeine Gold- und Silberscheideanstalt has been paying a dividend for the past six years. The company has been paying a stable dividend for a while now, which is great. However we'd prefer to see consistency for a few more years before giving it our full seal of approval. During the past six-year period, the first annual payment was €5.00 in 2013, compared to €3.80 last year. This works out to be a decline of approximately 4.5% per year over that time.
When a company's per-share dividend falls we question if this reflects poorly on either external business conditions, or the company's capital allocation decisions. Either way, we find it hard to get excited about a company with a declining dividend.
Dividend Growth Potential
While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. Over the past five years, it looks as though Allgemeine Gold- und Silberscheideanstalt's EPS have declined at around 14% a year. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Allgemeine Gold- und Silberscheideanstalt's earnings per share, which support the dividend, have been anything but stable.
Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Allgemeine Gold- und Silberscheideanstalt's payout ratio is within normal bounds. Second, earnings per share have been in decline, and the dividend history is shorter than we'd like. To conclude, we've spotted a couple of potential concerns with Allgemeine Gold- und Silberscheideanstalt that may make it less than ideal candidate for dividend investors.
Now, if you want to look closer, it would be worth checking out our free research on Allgemeine Gold- und Silberscheideanstalt management tenure, salary, and performance.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.