AMG Critical Materials N.V. (AMS:AMG) will increase its dividend from last year's comparable payment on the 9th of August to $0.40. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for AMG Critical Materials
AMG Critical Materials' Dividend Is Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, AMG Critical Materials' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 22.9% over the next year. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.
AMG Critical Materials' Dividend Has Lacked Consistency
AMG Critical Materials has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was $0.217, compared to the most recent full-year payment of $0.877. This works out to be a compound annual growth rate (CAGR) of approximately 19% 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.
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. It's encouraging to see that AMG Critical Materials has been growing its earnings per share at 27% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
AMG Critical Materials Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that AMG Critical Materials is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. As an example, we've identified 2 warning signs for AMG Critical Materials that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.