Lundin Mining's (TSE:LUN) Dividend Will Be $0.09

Lundin Mining Corporation's (TSE:LUN) investors are due to receive a payment of $0.09 per share on 13th of December. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Lundin Mining

Lundin Mining's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Lundin Mining's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 77.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 57% by next year, which is in a pretty sustainable range.

Lundin Mining's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was $0.0882, compared to the most recent full-year payment of $0.26. This means that it has been growing its distributions at 17% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Lundin Mining's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Lundin Mining is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Lundin Mining's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lundin Mining's payments, as there could be some issues with sustaining them into the future. While Lundin Mining is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Lundin Mining that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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