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

The board of Agnico Eagle Mines Limited (NYSE:AEM) has announced that it will pay a dividend on the 16th of December, with investors receiving $0.40 per share. This means the annual payment will be 1.8% of the current stock price, which is lower than the industry average.

See our latest analysis for Agnico Eagle Mines

Agnico Eagle Mines' Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Agnico Eagle Mines' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

Agnico Eagle Mines Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.32 in 2014 to the most recent total annual payment of $1.60. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Agnico Eagle Mines' Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Agnico Eagle Mines has impressed us by growing EPS at 22% per year over the past five years. Although earnings per share is up nicely Agnico Eagle Mines is paying out 128% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

In Summary

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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for Agnico Eagle Mines that investors need to be conscious of moving forward. Is Agnico Eagle Mines not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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