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

Agnico Eagle Mines Limited's (NYSE:AEM) investors are due to receive a payment of $0.40 per share on 16th of September. This means the annual payment will be 2.1% of the current stock price, which is lower than the industry average.

View our latest analysis for Agnico Eagle Mines

Agnico Eagle Mines' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Agnico Eagle Mines' dividend was higher than its profits, but the free cash flows quite comfortably covered it. 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.

The next year is set to see EPS grow by 183.4%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 53% which brings it into quite a comfortable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend 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 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 see if earnings per share is growing. It's encouraging to see that Agnico Eagle Mines has been growing its earnings per share at 22% a 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com