Is It Smart To Buy Sprott Inc. (TSE:SII) Before It Goes Ex-Dividend?

Sprott Inc. (TSE:SII) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Sprott's shares on or after the 9th of November, you won't be eligible to receive the dividend, when it is paid on the 28th of November.

The company's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$1.00 to shareholders. Calculating the last year's worth of payments shows that Sprott has a trailing yield of 3.2% on the current share price of CA$42.35. If you buy this business for its dividend, you should have an idea of whether Sprott's dividend is reliable and sustainable. So we need to investigate whether Sprott can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Sprott

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Sprott paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Sprott, with earnings per share up 4.7% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sprott has seen its dividend decline 1.5% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Should investors buy Sprott for the upcoming dividend? Sprott has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. We think this is a pretty attractive combination, and would be interested in investigating Sprott more closely.

So while Sprott looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Sprott you should know about.

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.