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It looks like Aura Minerals Inc. (TSE:ORA) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Aura Minerals investors that purchase the stock on or after the 15th of November will not receive the dividend, which will be paid on the 2nd of December.
The company's next dividend payment will be US$0.24 per share. Last year, in total, the company distributed US$0.70 to shareholders. Last year's total dividend payments show that Aura Minerals has a trailing yield of 5.6% on the current share price of CA$17.36. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Aura Minerals can afford its dividend, and if the dividend could grow.
View our latest analysis for Aura Minerals
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aura Minerals reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Aura Minerals didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Aura Minerals was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Aura Minerals has seen its dividend decline 4.2% per annum on average over the past four years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.