Is Highland Gold Mining Limited (LON:HGM) An Attractive Dividend Stock?

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 7 years, Highland Gold Mining Limited (LON:HGM) has returned an average of 6.00% per year to shareholders in terms of dividend yield. Should it have a place in your portfolio? Let's take a look at Highland Gold Mining in more detail. See our latest analysis for Highland Gold Mining

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Does it pay an annual yield higher than 75% of dividend payers?
• Has it paid dividend every year without dramatically reducing payout in the past?
• Has it increased its dividend per share amount over the past?
• Can it afford to pay the current rate of dividends from its earnings?
• Will it have the ability to keep paying its dividends going forward?

How does Highland Gold Mining fare?

Highland Gold Mining has a trailing twelve-month payout ratio of 70.04%, which means that the dividend is covered by earnings. However, going forward, analysts expect HGM's payout to fall to 43.88% of its earnings, which leads to a dividend yield of around 6.52%. However, EPS should increase to $0.24, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Highland Gold Mining as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Highland Gold Mining has a yield of 7.40%, which is high for Metals and Mining stocks.

Next Steps:

Keeping in mind the dividend characteristics above, Highland Gold Mining is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three essential aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for HGM’s future growth? Take a look at our free research report of analyst consensus for HGM’s outlook.
2. Valuation: What is HGM worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether HGM is currently mispriced by the market.
3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.