Is Anglo American plc (LON:AAL) A Smart Pick For Income Investors?

Over the past 10 years Anglo American plc (LON:AAL) has returned an average of 3.00% per year from dividend payouts. The company currently pays out a dividend yield of 4.48% to shareholders, making it a relatively attractive dividend stock. Let’s dig deeper into whether Anglo American should have a place in your portfolio. See our latest analysis for Anglo American

5 questions to ask before buying a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is it paying an annual yield above 75% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

LSE:AAL Historical Dividend Yield June 24th 18

Does Anglo American pass our checks?

The current trailing twelve-month payout ratio for the stock is 41.08%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect AAL’s payout to increase to 45.76% of its earnings, which leads to a dividend yield of around 4.48%. Moreover, EPS should increase to $2.6. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Anglo American generates a yield of 4.48%, which is high for Metals and Mining stocks.

Next Steps:

Taking into account the dividend metrics, Anglo American ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three pertinent factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for AAL’s future growth? Take a look at our free research report of analyst consensus for AAL’s outlook.

2. Valuation: What is AAL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AAL is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.