Lundin Gold Inc.’s (TSE:LUG) investors are due to receive a payment of $0.1348 per share on 25th of March. Based on this payment, the dividend yield on the company’s stock will be 3.5%, which is an attractive boost to shareholder returns.
See our latest analysis for Lundin Gold
Lundin Gold’s Payment Has Solid Earnings Coverage
If the payments aren’t sustainable, a high yield for a few years won’t matter that much. The last dividend was quite easily covered by Lundin Gold’s earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to rise by 45.2% over the next year. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.
Lundin Gold’s Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The payments haven’t really changed that much since 2 years ago. We’re glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. It’s encouraging to see that Lundin Gold has been growing its earnings per share at 50% a year over the past five years. The company’s earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Lundin Gold could prove to be a strong dividend payer.
We Really Like Lundin Gold’s Dividend
Overall, we like to see the dividend staying consistent, and we think Lundin Gold might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we’ve picked out 1 warning sign for Lundin Gold 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.
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