Anglo American Platinum (JSE:AMS) Will Pay A Dividend Of ZAR9.75

The board of Anglo American Platinum Limited (JSE:AMS) has announced that it will pay a dividend of ZAR9.75 per share on the 26th of August. This payment takes the dividend yield to 2.9%, which only provides a modest boost to overall returns.

Check out our latest analysis for Anglo American Platinum

Anglo American Platinum's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Anglo American Platinum's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 75.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Anglo American Platinum's Dividend Has Lacked Consistency

Anglo American Platinum has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was ZAR3.49, compared to the most recent full-year payment of ZAR19.05. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

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. Unfortunately, Anglo American Platinum's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Anglo American Platinum's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 2 warning signs for Anglo American Platinum that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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