Stock Analysis

Newmont (NYSE:NEM) Is Due To Pay A Dividend Of US$0.55

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The board of Newmont Corporation (NYSE:NEM) has announced that it will pay a dividend on the 16th of June, with investors receiving US$0.55 per share. This payment means that the dividend yield will be 3.3%, which is around the industry average.

Check out our latest analysis for Newmont

Newmont Doesn't Earn Enough To Cover Its Payments

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the company was paying out 175% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 72%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next 12 months is set to see EPS grow by 149.8%. If the dividend continues on its recent course, the payout ratio in 12 months could be 100%, which is a bit high and could start applying pressure to the balance sheet.

NYSE:NEM Historic Dividend May 23rd 2022

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was US$1.20 in 2012, and the most recent fiscal year payment was US$2.20. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Newmont has impressed us by growing EPS at 42% per year over the past five years. Although earnings per share is up nicely Newmont is paying out 175% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On Newmont's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 5 warning signs for Newmont that investors should take into consideration. 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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