Stock Analysis

Newmont (NYSE:NEM) Has Affirmed Its Dividend Of $0.55

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NYSE:NEM
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The board of Newmont Corporation (NYSE:NEM) has announced that it will pay a dividend on the 29th of December, with investors receiving $0.55 per share. Based on this payment, the dividend yield on the company's stock will be 4.7%, which is an attractive boost to shareholder returns.

See our latest analysis for Newmont

Newmont Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 180% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 47.5% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 173% over the next year.

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NYSE:NEM Historic Dividend November 13th 2022

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 $1.40 in 2012, and the most recent fiscal year payment was $2.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.6% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Newmont's 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. We are encouraged to see that Newmont has grown earnings per share at 51% per year over the past five years. While EPS is growing rapidly, Newmont paid out a very high 180% 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.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 identified 4 warning signs for Newmont (2 are concerning!) that you should be aware of before investing. Is Newmont not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

What are the risks and opportunities for Newmont?

Newmont Corporation engages in the production and exploration of gold.

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Rewards

  • Trading at 37% below our estimate of its fair value

  • Earnings are forecast to grow 13.7% per year

Risks

  • Profit margins (8%) are lower than last year (16.2%)

  • Large one-off items impacting financial results

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