AMG Critical Materials' (AMS:AMG) Shareholders Will Receive A Bigger Dividend Than Last Year

AMG Critical Materials N.V. (AMS:AMG) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of August to $0.40. Although the dividend is now higher, the yield is only 2.0%, which is below the industry average.

See our latest analysis for AMG Critical Materials

AMG Critical Materials' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, AMG Critical Materials' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 22.9% over the next year. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

AMG Critical Materials' Dividend Has Lacked Consistency

It's comforting to see that AMG Critical Materials has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was $0.217, compared to the most recent full-year payment of $0.877. This means that it has been growing its distributions at 19% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. AMG Critical Materials has seen EPS rising for the last five years, at 27% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

AMG Critical Materials Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for AMG Critical Materials that investors should take into consideration. Is AMG Critical Materials not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.