Could Allgemeine Gold- und Silberscheideanstalt AG (MUN:AGS) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.
With a goodly-sized dividend yield despite a relatively short payment history, investors might be wondering if Allgemeine Gold- und Silberscheideanstalt is a new dividend aristocrat in the making. It sure looks interesting on these metrics - but there's always more to the story . When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, 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. In the last year, Allgemeine Gold- und Silberscheideanstalt paid out 57% of its profit as dividends. This is a fairly normal payout ratio among most businesses. It allows a higher dividend to be paid to shareholders, but does limit the capital retained in the business - which could be good or bad.
With a strong net cash balance, Allgemeine Gold- und Silberscheideanstalt investors may not have much to worry about in the near term from a dividend perspective.
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.
One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. Allgemeine Gold- und Silberscheideanstalt has been paying a dividend for the past six years. Its dividend has not fluctuated much that time, which we like, but we're conscious that the company might not yet have a track record of maintaining dividends in all economic conditions. During the past six-year period, the first annual payment was €5.00 in 2014, compared to €3.80 last year. The dividend has shrunk at around 4.5% a year during that period.
We struggle to make a case for buying Allgemeine Gold- und Silberscheideanstalt for its dividend, given that payments have shrunk over the past six years.
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.
To summarise, shareholders should always check that Allgemeine Gold- und Silberscheideanstalt's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Allgemeine Gold- und Silberscheideanstalt's payout ratio is within an average range for most market participants. Earnings per share have been falling, and the company has a relatively short dividend history - shorter than we like, anyway. 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.
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 accross 3 warning signs for Allgemeine Gold- und Silberscheideanstalt you should be aware of, and 1 of them is potentially serious.
If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.