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Important news for shareholders and potential investors in Freeport-McMoRan Inc (NYSE:FCX): The dividend payment of US$0.05 per share will be distributed to shareholders on 01 November 2018, and the stock will begin trading ex-dividend at an earlier date, 12 October 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Freeport-McMoRan’s most recent financial data to examine its dividend characteristics in more detail.

View our latest analysis for Freeport-McMoRan

How I analyze a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend-paying companies?

• Does it consistently pay out dividends without missing a payment of significantly cutting payout?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How well does Freeport-McMoRan fit our criteria?

The company currently pays out 5.0% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 21%, leading to a dividend yield of around 2.1%. However, EPS is forecasted to fall to $1.43 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Not only have dividend payouts from Freeport-McMoRan fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.

Relative to peers, Freeport-McMoRan has a yield of 1.5%, which is on the low-side for Metals and Mining stocks.

Next Steps:

If Freeport-McMoRan is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important factors you should further examine: