Last update on 2024-06-27

Newmont (NEM) - Dividend Analysis (Final Score: 5/8)

Newmont (NEM) dividend analysis delivers an 8-criteria score of 5/8, evaluating performance and stability of company's dividend policy. Get in-depth insights here!

Short Analysis - Dividend Score: 5

We're running Newmont (NEM) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Newmont (NEM) is based on an 8-criteria scoring system to assess the performance and stability of the company's dividend policy. Here are the highlights: 1. **Dividend Yield**: Newmont's current yield is 3.8657%, significantly higher than the industry average of 1.81%, signaling attractive income returns. 2. **Dividend Growth Rate**: Evaluating if the annual growth rate over the past 20 years is higher than 5% can indicate long-term financial health. 3. **Payout Ratio**: Newmont's average payout ratio of 3.71% over 20 years is well below the 65% benchmark, showing a conservative earnings retention policy. 4. **Dividend Coverage by Earnings**: Coverage has fluctuated, with some years showing inadequate coverage, posing risks to dividend reliability. 5. **Dividend Coverage by Cash Flow**: While volatile, recent years show improved cash flow stability for covering dividends. 6. **Dividend Stability**: There have been fluctuations, particularly in 2013-2014, but a recent recovery trend shows improvement. 7. **Continuous Payments for 25+ Years**: Newmont has consistently paid dividends for the last 26 years, indicating financial stability. 8. **Stock Repurchases**: Inconsistent repurchase activity and long-term share dilution could be viewed negatively by investors looking for consistent buybacks.

Insights for Value Investors Seeking Stable Income

Newmont (NEM) shows some positive trends such as a high current dividend yield, conservative payout ratio, and a strong history of dividend payments for over 25 years. However, there are concerns regarding the sustainability of dividend coverage by earnings and cash flow, and the lack of consistent stock repurchase programs. If you are a long-term income-focused investor, Newmont could be worth considering, especially with its attractive yield. But, the volatility in coverage and historical dividend drops suggest a need for cautious optimism. Conducting further research into recent financial stability and market conditions impacting Newmont would be prudent before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a key metric that measures the annual dividends paid out by a company as a percentage of its stock price. It is important because it gives investors an idea of the income they can expect from their investment relative to its price.

Newmont's (NEM) current dividend yield of 3.8657% is significantly higher than the industry average of 1.81%. Over the past 20 years, Newmont's dividend yield has shown considerable volatility but has trended higher in recent years. Peaks in yield, such as in 2011 (5.3191%) and 2022 (4.661%), generally coincide with lower stock prices during those periods. The strong current yield suggests that Newmont is committed to returning value to shareholders, which is positive. However, investors should also be cautious about the sustainability of such high yields in the long term. Overall, the high current yield relative to the industry is a good trend, signaling potential for attractive income returns.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for Newmont (NEM) and why it is important to consider

The Dividend Growth Rate criterion evaluates the annual percentage growth rate of dividends distributed to shareholders over a specified period. For Newmont (NEM), assessing whether the rate is higher than 5% over the past 20 years can provide insight into the company’s long-term financial health and commitment to returning value to shareholders. It is essential since consistent dividend growth can signal financial stability and positive future performance.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio is a crucial metric that shows how much of a company's earnings are being paid out as dividends. Typically, a ratio below 65% is considered healthy, indicating that the company retains a reasonable portion of earnings for growth and future stability.

The average payout ratio for Newmont (NEM) over the last 20 years is approximately 3.71%. This figure is significantly below the 65% threshold, indicating that the company has a conservative dividend policy and is retaining most of its earnings. While certain years had negative payout ratios (e.g., 2007, 2013, 2017), which may indicate losses or specific financial strategies, the overall low average suggests the company prioritizes earnings retention. This is generally a good trend, showing financial prudence and stability. However, the extreme values like 150.7572 in 2021 and -407.1812 in 2022 could point to exceptional financial events or anomalies that warrant further investigation.

Dividends Well Covered by Earnings?

Assessing whether dividends are well covered by earnings is crucial as it indicates the company's ability to sustain its dividend payments. If earnings are significantly higher than dividends, it suggests financial health and stability.

From 2003 to 2023, Newmont's dividend coverage ratio varies widely. In some years, like 2011 (1.377) and 2021 (1.507), dividends are well covered by earnings, underscoring good financial health during those periods. However, negative coverage ratios in years like 2007 (-0.096), 2013 (-0.248), 2023 (-0.540), and especially 2022 (-4.072), show that the company distributed dividends even when it incurred losses. This inconsistency raises concerns about dividend sustainability, particularly in deficient periods. Overall, despite good coverage in some years, the erratic trend poses risks for long-term dividend reliability.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow refers to the company's ability to pay dividends from its free cash flow rather than relying on debt or other sources of funding. It demonstrates financial stability.

Over the years, Newmont (NEM) has exhibited considerable volatility in its ability to cover dividends with free cash flow, as indicated by the Dividend Covered by Cashflow ratio oscillating significantly. Initial years like 2003, 2004, and some recent years such as 2022 and 2023 show strong coverage with ratios higher than 1. However, there were concerning periods, notably around 2005 to 2014, where the coverage ratios were negative or extremely low, signaling potential reliance on non-operational sources to finance dividends. The turning point seems to occur around 2019, where the ratios stabilize and eventually rise dramatically. This long-term volatility can be worrisome as inconsistent free cash flow generation puts the sustainability of dividend payments under question. The trend observed in recent years is promising, showing stronger and more consistent free cash flow performance supporting dividend payouts. This improvement bodes well for future dividend reliability, but historical volatility still underscores the need for cautious optimism among investors. These patterns suggest mixed signals—positive recent performance but a past fraught with inconsistency.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments over the past two decades ensures a reliable income stream for investors and signifies financial health and confidence of the company.

Examining the dividend trends for Newmont (NEM) over the past 20 years, it's clear that there have been some fluctuations. Particularly significant is the severe drop in dividends around 2013 and 2014, where dividends fell from 1.4 USD in 2012 to 1.225 USD, and further plummeted to 0.225 USD. Such drops can be concerning for income-seeking investors, though the situation appeared to stabilize and improve in subsequent years, with dividends climbing gradually to 1.44 USD in 2019 and significantly higher peaks in 2021 and 2022. However, the initial drop by 20% indeed returned false, indicating higher stresses in dividend payouts sometime during these years. This mixed trend reveals periods of instability, which could be detrimental for consistent income but also highlights resilience in recovery and growth in later years. Such patterns must be carefully analyzed depending on the risk tolerance and investment horizon of the investor.

Dividends Paid for Over 25 Years?

This criterion verifies whether Newmont has consistently paid dividends for over 25 years, a key indicator of financial health and shareholder value.

Newmont has paid dividends continuously for the last 26 years, demonstrating its commitment to returning value to shareholders. Over the years, the dividend per share has exhibited variability, with notable increases in certain years (e.g., 1.4 in 2012, 2.2 in 2020 and 2021). However, periods of reduced dividends, like in 2014 and during the mid-2010s, might signal operational or market challenges. Still, the 26-year streak of dividend payments is solidly indicative of a shareholder-friendly policy and overall financial stability. This is a positive trend for long-term investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a firm's commitment to returning value to shareholders and demonstrate confidence in its financial health.

Newmont's share repurchase pattern over the past 20 years indicates sporadic buybacks with notable share repurchases during the years 2012, 2013, 2014, 2021, and 2022. Despite these repurchase activities, the average repurchase ratio of 3.8922% suggests inconsistency, and the overall trend shows an increase in the number of outstanding shares from 413 million in 2003 to 841 million in 2023. This trend reflects dilution, which potentially undermines shareholder value. While repurchasing shares can indicate periods of strong financial health or positive cash flow, Newmont's inconsistent repurchasing trend and long-term share dilution could be viewed unfavorably by investors looking for steady buyback programs and reduced share count over time.