A-Mark Precious Metals (NASDAQ:AMRK) Is Due To Pay A Dividend Of $0.20

The board of A-Mark Precious Metals, Inc. (NASDAQ:AMRK) has announced that it will pay a dividend on the 31st of July, with investors receiving $0.20 per share. This payment means that the dividend yield will be 2.3%, which is around the industry average.

See our latest analysis for A-Mark Precious Metals

A-Mark Precious Metals' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, A-Mark Precious Metals' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 17.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

A-Mark Precious Metals' Dividend Has Lacked Consistency

A-Mark Precious Metals has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was $0.10 in 2015, and the most recent fiscal year payment was $0.80. This means that it has been growing its distributions at 26% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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 A-Mark Precious Metals has grown earnings per share at 436% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On A-Mark Precious Metals' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While A-Mark Precious Metals is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for A-Mark Precious Metals you should be aware of, and 1 of them is a bit unpleasant. 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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