Zooming in on NYSE:AEM’s 1.2% Dividend Yield
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Historically, Agnico Eagle Mines Limited (NYSE:AEM) has been paying a dividend to shareholders. Today it yields 1.2%. Does Agnico Eagle Mines tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Agnico Eagle Mines
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is its annual yield among the top 25% of dividend-paying companies?
Has it paid dividend every year without dramatically reducing payout in the past?
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 it have the ability to keep paying its dividends going forward?
Does Agnico Eagle Mines pass our checks?
Agnico Eagle Mines has a trailing twelve-month payout ratio of 95%, which means that the dividend is not well-covered by its earnings. However, going forward, analysts expect AEM’s payout to fall into a more sustainable range of 43% of its earnings, which leads to a dividend yield of 1.2%. Moreover, EPS should increase to $0.62, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.
Relative to peers, Agnico Eagle Mines has a yield of 1.2%, which is on the low-side for Metals and Mining stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Agnico Eagle Mines for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three relevant factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for AEM’s future growth? Take a look at our free research report of analyst consensus for AEM’s outlook.
Valuation: What is AEM 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 AEM 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
