Agnico Eagle Mines (NYSE:AEM) Is Paying Out A Dividend Of $0.40

Agnico Eagle Mines Limited (NYSE:AEM) has announced that it will pay a dividend of $0.40 per share on the 16th of September. Including this payment, the dividend yield on the stock will be 2.0%, which is a modest boost for shareholders' returns.

View our latest analysis for Agnico Eagle Mines

Agnico Eagle Mines' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. 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.

Looking forward, earnings per share is forecast to rise by 175.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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 $0.88 in 2014, and the most recent fiscal year payment was $1.60. This means that it has been growing its distributions at 6.2% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Agnico Eagle Mines' Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Agnico Eagle Mines has impressed us by growing EPS at 22% per year over the past five years. While EPS is growing rapidly, Agnico Eagle Mines paid out a very high 128% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

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 is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 4 warning signs for Agnico Eagle Mines that investors should take into consideration. 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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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.