Sandstorm Gold Ltd. (TSE:SSL) will pay a dividend of $0.02 on the 28th of July. This means the annual payment will be 1.1% of the current stock price, which is lower than the industry average.
See our latest analysis for Sandstorm Gold
Sandstorm Gold's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Sandstorm Gold was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
EPS is set to fall by 60.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 71%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Sandstorm Gold Is Still Building Its Track Record
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2021, the dividend has gone from $0.0613 total annually to $0.0587. The dividend has shrunk at around 2.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Sandstorm Gold has grown earnings per share at 66% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
An additional note is that the company has been raising capital by issuing stock equal to 55% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 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.
About TSX:SSL
Reasonable growth potential with proven track record.
