Barrick Gold Corporation (TSE:ABX) shares will hit their ex-dividend date in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for stockholders to be on the company’s books to be eligible to receive dividends. The ex-dividend date is important because every time shares are bought or sold, it takes at least two business days for the trade to settle. So Barrick Gold investors who bought shares after August 30th won’t be able to receive the dividend paid on September 16th.
The company’s next dividend payment will be US$0.10 per share. Last year, the company distributed a total of US$0.40 to shareholders. Based on last year’s dividends, Barrick Gold has a historical yield of 2.0% on the current share price of C$27.71. Dividends can be a major contributor to investment returns for long term holders, but only if they continue to be paid. As a result, we should always check whether dividend payments are sustainable and if the company is growing.
Check out our latest analysis for Barrick Gold
Dividends are typically paid out of company profits, so if a company pays out more than it earned, there is a higher risk that the dividend will be cut. Barrick Gold paid out a comfortable 46% of its profits last year. That said, even highly profitable companies sometimes cannot generate enough cash to pay their dividends. That’s why we always check if the dividend is covered by cash flow. Last year the company paid out more than three-quarters (81%) of the free cash flow it generated. This is quite high and may be starting to limit reinvestment in the business.
It’s positive to see that Barrick Gold’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s dividend payout ratio, plus analyst estimates of its future dividends.
Historical Dividend
Are profits and dividends increasing?
Companies with declining earnings are tricky from a dividend perspective. If business falters and the dividend is cut, the company’s value could plummet. Readers will understand why we’re concerned that Barrick Gold’s earnings per share have fallen 19% per year over the past five years. As earnings per share fall, so does the upper limit on the dividend that can be paid.
The main way most investors assess a company’s dividend prospects is to look at the historical rate of dividend growth, and over the past 10 years, Barrick Gold has grown its dividend by approximately 7.2% per year on average.
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summary
Is Barrick Gold an attractive dividend stock, or should you put it on hold? The company’s earnings per share have fallen significantly, but it still pays out less than half of its income and more than half of its cash flow as dividends. Neither payout ratio seems to be a near-term concern, but we are concerned about its earnings. In summary, it’s hard to get excited about Barrick Gold from a dividend perspective.
However, if you’re still considering Barrick Gold as an investment, you should definitely consider some of the risks associated with Barrick Gold, as an example, we’ve spotted 2 warning signs for Barrick Gold you should be aware of.
If you’re looking for stocks with high dividends, we recommend checking out our picks of the top dividend stocks.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.