GCM Mining (TSE:GCM) Will Pay A Dividend Of CA$0.015

The board of GCM Mining Corp. (TSE:GCM) has announced that it will pay a dividend on the 15th of June, with investors receiving CA$0.015 per share. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

See our latest analysis for GCM Mining

GCM Mining's Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, GCM Mining was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 5.7%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 28%, which we are pretty comfortable with and we think is feasible on an earnings basis.

GCM Mining 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 dividend has gone from US$0.045 in 2020 to the most recent annual payment of US$0.14. This implies that the company grew its distributions at a yearly rate of about 76% over that duration. GCM Mining has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

GCM Mining May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.4% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, GCM Mining could always pay out a higher proportion of earnings to increase shareholder returns.

We'd also point out that GCM Mining has issued stock equal to 59% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On GCM Mining's Dividend

Overall, a consistent dividend is a good thing, and we think that GCM Mining has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for GCM Mining you should be aware of, and 1 of them can't be ignored. Is GCM Mining 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.