North American Palladium Ltd. (fka PALDF)

[JD400]

Great to see NAPs earnings have been skyrocketing_up_81%_per_year for the past five years.

A Sterling Combination

" North American Palladium has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; "

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. North American Palladium paid out just 4.6% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 6.0% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.


PALDF