Anglo Asian Mining PLC (LON:AAZ) Looks Interesting, And It's About To Pay A Dividend

Anglo Asian Mining PLC (LON:AAZ) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 8th of October in order to receive the dividend, which the company will pay on the 5th of November.

Anglo Asian Mining's upcoming dividend is UK£0.045 a share, following on from the last 12 months, when the company distributed a total of UK£0.08 per share to shareholders. Calculating the last year's worth of payments shows that Anglo Asian Mining has a trailing yield of 4.7% on the current share price of £1.315. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Anglo Asian Mining

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Anglo Asian Mining paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether Anglo Asian Mining generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Anglo Asian Mining'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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Anglo Asian Mining has grown its earnings rapidly, up 66% a year for the past five years. Anglo Asian Mining is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last two years, Anglo Asian Mining has lifted its dividend by approximately 15% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Anglo Asian Mining an attractive dividend stock, or better left on the shelf? Anglo Asian Mining has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Anglo Asian Mining is facing. Case in point: We've spotted 2 warning signs for Anglo Asian Mining you should be aware of.

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.

If you decide to trade Anglo Asian Mining, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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