Agnico Eagle Mines' (NYSE:AEM) Dividend Will Be $0.40

Agnico Eagle Mines Limited's (NYSE:AEM) investors are due to receive a payment of $0.40 per share on 15th of September. Based on this payment, the dividend yield on the company's stock will be 3.1%, which is an attractive boost to shareholder returns.

See our latest analysis for Agnico Eagle Mines

Agnico Eagle Mines Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Agnico Eagle Mines was paying only paying out a fraction of earnings, but the payment was a massive 116% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to fall by 73.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 135%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was $0.80 in 2013, and the most recent fiscal year payment was $1.60. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Agnico Eagle Mines might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Agnico Eagle Mines has impressed us by growing EPS at 48% 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.

Our Thoughts On Agnico Eagle Mines' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Agnico Eagle Mines' payments, as there could be some issues with sustaining them into the future. While Agnico Eagle Mines is earning enough to cover the payments, the cash flows are lacking. We don't think Agnico Eagle Mines is a great stock to add to your portfolio if income is your focus.

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 4 warning signs for Agnico Eagle Mines you should be aware of, and 1 of them shouldn't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield 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.