Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Highland Gold Mining Limited (LON:HGM) has been paying a dividend to shareholders. Today it yields 6.6%. Should it have a place in your portfolio? Let's take a look at Highland Gold Mining in more detail.
View our latest analysis for Highland Gold Mining
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown 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?
Does Highland Gold Mining pass our checks?
The company currently pays out 74% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 34% which, assuming the share price stays the same, leads to a dividend yield of 5.5%. Moreover, EPS is also forecasted to fall to $0.21 in the upcoming year. The lower EPS on top of a lower payout ratio will lead to a fall in dividend payment moving forward.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. The reality is that it is too early to consider 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.
Relative to peers, Highland Gold Mining produces a yield of 6.6%, which is high for Metals and Mining stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Highland Gold Mining is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential factors you should look at:
- 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.
- 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.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
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.