Anglo Asian Mining PLC (LON:AAZ) stock is about to trade ex-dividend in 4 days. Ex-dividend means that investors that purchase the stock on or after the 2nd of July will not receive this dividend, which will be paid 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. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to investigate whether Anglo Asian Mining can afford its dividend, and if the dividend could grow.
See our latest analysis for Anglo Asian Mining
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. 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. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Click here to see how much of its profit Anglo Asian Mining paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. 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.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. In the last two years, Anglo Asian Mining has lifted its dividend by approximately 15% a year on average. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
From a dividend perspective, should investors buy or avoid Anglo Asian Mining? 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. There’s a lot to like about Anglo Asian Mining, and we would prioritise taking a closer look at it.
On that note, you’ll want to research what risks Anglo Asian Mining is facing. To help with this, we’ve discovered 2 warning signs for Anglo Asian Mining that you should be aware of before investing in their shares.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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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