- Metals and Mining
AMG Advanced Metallurgical Group's (AMS:AMG) Upcoming Dividend Will Be Larger Than Last Year's
The board of AMG Advanced Metallurgical Group N.V. (AMS:AMG) has announced that it will be paying its dividend of $0.40 on the 11th of May, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 2.2% is only a modest boost to shareholder returns.
See our latest analysis for AMG Advanced Metallurgical Group
AMG Advanced Metallurgical Group's Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. AMG Advanced Metallurgical Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to rise by 19.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.
AMG Advanced Metallurgical Group's Dividend Has Lacked Consistency
It's comforting to see that AMG Advanced Metallurgical Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the dividend has gone from $0.217 total annually to $0.846. This means that it has been growing its distributions at 21% 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 Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that AMG Advanced Metallurgical Group has been growing its earnings per share at 25% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
In summary, while it's always good to see the dividend being raised, we don't think AMG Advanced Metallurgical Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for AMG Advanced Metallurgical Group you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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AMG Critical Materials
AMG Critical Materials N.V. produces and sells engineered specialty metals and mineral products.
Solid track record with excellent balance sheet.