Lundin Mining (TSE:LUN) Has Announced That It Will Be Increasing Its Dividend To CA$0.09

By
Simply Wall St
Published
November 23, 2021
TSX:LUN
Source: Shutterstock

Lundin Mining Corporation (TSE:LUN) will increase its dividend on the 15th of December to CA$0.09. This makes the dividend yield 3.6%, which is above the industry average.

View our latest analysis for Lundin Mining

Lundin Mining's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Lundin Mining's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 17.5% over the next year. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

historic-dividend
TSX:LUN Historic Dividend November 23rd 2021

Lundin Mining Doesn't Have A Long Payment History

It is great to see that Lundin Mining has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the first annual payment was US$0.088, compared to the most recent full-year payment of US$0.28. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Lundin Mining has seen EPS rising for the last five years, at 22% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Lundin Mining Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Lundin Mining you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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