Sandstorm Gold (TSE:SSL) Has Announced A Dividend Of $0.02

Sandstorm Gold Ltd.'s (TSE:SSL) investors are due to receive a payment of $0.02 per share on 26th of July. Including this payment, the dividend yield on the stock will be 1.0%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Sandstorm Gold

Sandstorm Gold's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Sandstorm Gold's dividend made up quite a large proportion of earnings but only 14% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 27.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

Sandstorm Gold Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2021, the dividend has gone from $0.0613 total annually to $0.0585. Doing the maths, this is a decline of about 1.6% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Sandstorm Gold Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Sandstorm Gold has impressed us by growing EPS at 11% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Sandstorm Gold's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Sandstorm Gold that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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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