Lundin Gold (TSE:LUG) Has Announced That It Will Be Increasing Its Dividend To $0.20

Lundin Gold Inc. (TSE:LUG) will increase its dividend from last year's comparable payment on the 25th of September to $0.20. Based on this payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

See our latest analysis for Lundin Gold

Lundin Gold's 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. The last dividend was quite easily covered by Lundin Gold's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 70.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Lundin Gold Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The last annual payment of $0.40 was flat on the annual payment from2 years ago. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Lundin Gold has been growing its earnings per share at 50% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Lundin Gold Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Lundin Gold that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.