Why It Might Not Make Sense To Buy Aura Minerals Inc. (TSE:ORA) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aura Minerals Inc. (TSE:ORA) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Aura Minerals investors that purchase the stock on or after the 18th of August will not receive the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be US$0.33 per share, and in the last 12 months, the company paid a total of US$1.60 per share. Last year's total dividend payments show that Aura Minerals has a trailing yield of 6.1% on the current share price of CA$36.29. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Aura Minerals can afford its dividend, and if the dividend could grow.

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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 lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the past year it paid out 190% of its free cash flow as dividends, which is uncomfortably 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.

View 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 August 14th 2025

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. 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.

Story Continues

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last four years, Aura Minerals has lifted its dividend by approximately 18% a year on average.

We update our analysis on Aura Minerals every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Aura Minerals an attractive dividend stock, or better left on the shelf? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Aura Minerals.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Aura Minerals. To help with this, we've discovered 2 warning signs for Aura Minerals (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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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