Ramaco Resources (NASDAQ:METC) Is Increasing Its Dividend To $0.1375
The board of Ramaco Resources, Inc. (NASDAQ:METC) has announced that it will be paying its dividend of $0.1375 on the 15th of March, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ramaco Resources' stock price has increased by 56% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Ramaco Resources
Ramaco Resources' Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Ramaco Resources' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 181.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 63% by next year, which is in a pretty sustainable range.
Ramaco Resources Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 2 years was $0.452 in 2022, and the most recent fiscal year payment was $0.50. This means that it has been growing its distributions at 5.2% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Ramaco Resources to be a consistent dividend paying stock.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Ramaco Resources has grown earnings per share at 21% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We should note that Ramaco Resources has issued stock equal to 19% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
We Really Like Ramaco Resources' Dividend
Overall, a dividend increase is always good, and we think that Ramaco Resources is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 5 warning signs for Ramaco Resources you should be aware of, and 1 of them makes us a bit uncomfortable. Is Ramaco Resources not quite the opportunity you were looking for? Why not check out our selection of top 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.
