Ramaco Resources (NASDAQ:METC) Has Announced That It Will Be Increasing Its Dividend To $0.1375

Ramaco Resources, Inc. (NASDAQ:METC) will increase its dividend from last year's comparable payment on the 15th of March to $0.1375. This makes the dividend yield about the same as the industry average at 2.6%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Ramaco Resources' stock price has increased by 60% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Ramaco Resources

Ramaco Resources' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Ramaco Resources' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 58%, which makes us pretty comfortable with the sustainability of the dividend.

Ramaco Resources Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 2 years was $0.452 in 2022, and the most recent fiscal year payment was $0.50. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Ramaco Resources has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Ramaco Resources has impressed us by growing EPS at 21% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We should note that Ramaco Resources has issued stock equal to 19% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Ramaco Resources Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 5 warning signs for Ramaco Resources you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.