Agnico Eagle Mines (NYSE:AEM) Has Announced A Dividend Of $0.40

Agnico Eagle Mines Limited (NYSE:AEM) will pay a dividend of $0.40 on the 16th of December. The dividend yield is 2.0% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Agnico Eagle Mines

Agnico Eagle Mines' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Agnico Eagle Mines' profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, earnings per share is forecast to rise exponentially over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 48% which is fairly sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.88 in 2014, and the most recent fiscal year payment was $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Agnico Eagle Mines' Dividend Might Lack Growth

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Agnico Eagle Mines has impressed us by growing EPS at 22% per year over the past five years. EPS has been growing well, but Agnico Eagle Mines has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

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 example, we've picked out 4 warning signs for Agnico Eagle Mines that investors should know about before committing capital to this stock. 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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