A-Mark Precious Metals (NASDAQ:AMRK) Will Pay A Dividend Of $0.20

The board of A-Mark Precious Metals, Inc. (NASDAQ:AMRK) has announced that it will pay a dividend of $0.20 per share on the 24th of October. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

See our latest analysis for A-Mark Precious Metals

A-Mark Precious Metals' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. A-Mark Precious Metals is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to fall by 18.9%. If the dividend continues along recent trends, we estimate the payout ratio could be 18%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

A-Mark Precious Metals' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of $0.10 in 2015 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 30% 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 see if earnings per share is growing. A-Mark Precious Metals has seen EPS rising for the last five years, at 47% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about A-Mark Precious Metals' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think A-Mark Precious Metals is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for A-Mark Precious Metals you should be aware of, and 2 of them don't sit too well with us. Is A-Mark Precious Metals 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.