Here's What We Like About Yamana Gold's (TSE:YRI) Upcoming Dividend

Yamana Gold Inc. (TSE:YRI) stock is about to trade ex-dividend in day or two. You can purchase shares before the 30th of December in order to receive the dividend, which the company will pay on the 14th of January.

Yamana Gold's next dividend payment will be US$0.026 per share, on the back of last year when the company paid a total of US$0.10 to shareholders. Based on the last year's worth of payments, Yamana Gold has a trailing yield of 1.9% on the current stock price of CA$7.27. 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! As a result, readers should always check whether Yamana Gold has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Yamana Gold

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Yamana Gold paying out a modest 46% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 12% of its free cash flow last year.

It's positive to see that Yamana Gold's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 Yamana Gold has grown its earnings rapidly, up 62% a year for the past five years. Yamana Gold is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Yamana Gold has lifted its dividend by approximately 10% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Yamana Gold worth buying for its dividend? It's great that Yamana Gold is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Yamana Gold, and we would prioritise taking a closer look at it.

So while Yamana Gold looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Yamana Gold you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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