The board of A-Mark Precious Metals, Inc. (NASDAQ:AMRK) has announced that it will pay a dividend on the 29th of April, with investors receiving $0.20 per share. The dividend yield will be 3.8% based on this payment which is still above the industry average.
A-Mark Precious Metals' Payment Could Potentially Have Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, A-Mark Precious Metals' dividend was comfortably covered by both cash flow and earnings. 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 18.5% over the next year. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.
Check out our latest analysis for A-Mark Precious Metals
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. 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. We are encouraged to see that A-Mark Precious Metals has grown earnings per share at 81% 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.
A-Mark Precious Metals Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think A-Mark Precious Metals 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.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for A-Mark Precious Metals (of which 1 is a bit concerning!) you should know about. Is A-Mark Precious Metals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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