How safe is Antofagasta's (LON:ANTO) dividend payment?

Income investors know that dividend payments are far from certain.

In the UK, 2018 was a great year for dividends but a bad one for share prices, meaning yields reached extraordinary heights - but how sustainable are these dividends? Take copper miner Antofagasta (LON:ANTO), for example, which recently reported a 34% decrease in net income.

One of the quickest ways to check up on Antofagasta is to check the dividend cover (earnings per share divided by dividend per share). Dividend cover of two times or above is strong. Anything below one and a half times should be stirring us to investigate in more detail.

Calculating Antofagasta’s dividend cover ratio 

A low level of dividend cover means that a small decline in earnings could consign your dividend payment to the scrap heap. It happens all the time. With that in mind, let’s take a look at Antofagasta’s (LON:ANTO) dividend cover.

We can get all the information we need to see if Antofagasta has an adequate level of dividend cover from the group’s StockReport. The group’s trailing twelve-month earnings per share is 51p and its trailing twelve-month dividend per share is 44p. 

Divide the former by the latter and we get a trailing twelve-month dividend cover for Antofagasta of 1.16. This is below the 1.5 times cover limit that marks the point at which we should do some further research on dividend sustainability and safety.

Income investing: what you need to know

For many investors, dividends are a vital part of their long-term strategy. That's why we have created a variety of income-focused stock screens, such as the Best Dividends Screen, to identify promising candidates for income portfolios. Take a look and see if any of the qualifying stocks might be worthy of further research.

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