Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Aura Minerals Inc. (TSE:ORA) is about to go ex-dividend in just 2 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Aura Minerals' shares before the 13th of May to receive the dividend, which will be paid on the 20th of May.

The company's next dividend payment will be US$0.40 per share, on the back of last year when the company paid a total of US$0.59 to shareholders. Looking at the last 12 months of distributions, Aura Minerals has a trailing yield of approximately 3.1% on its current stock price of CA$26.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Aura Minerals paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Aura Minerals didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Aura Minerals paid out more free cash flow than it generated - 174%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

See our latest analysis for Aura Minerals

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.TSX:ORA Historic Dividend May 10th 2025

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. Aura Minerals reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

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The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Aura Minerals has seen its dividend decline 8.2% per annum on average over the past four years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Get our latest analysis on Aura Minerals's balance sheet health here.

To Sum It Up

Should investors buy Aura Minerals for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that being said, if you're still considering Aura Minerals as an investment, you'll find it beneficial to know what risks this stock is facing. For instance, we've identified 3 warning signs for Aura Minerals (2 are potentially serious) you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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