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AMG Critical Materials N.V.'s (AMS:AMG) investors are due to receive a payment of $0.20 per share on 19th of May. Including this payment, the dividend yield on the stock will be 2.0%, which is a modest boost for shareholders' returns.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that AMG Critical Materials' stock price has increased by 34% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
AMG Critical Materials' Long-term Dividend Outlook appears Promising
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Despite not generating a profit, AMG Critical Materials is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 31%, which makes us pretty comfortable with the sustainability of the dividend.
Check out our latest analysis for AMG Critical Materials
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.217 in 2015 to the most recent total annual payment of $0.432. This implies that the company grew its distributions at a yearly rate of about 7.1% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Company Could Face Some Challenges Growing The Dividend
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. Even though the company is not profitable, it is growing at a solid clip. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.