Don't Race Out To Buy U.S. Global Investors, Inc. (NASDAQ:GROW) Just Because It's Going Ex-Dividend

It looks like U.S. Global Investors, Inc. (NASDAQ:GROW) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase U.S. Global Investors' shares before the 16th of December in order to be eligible for the dividend, which will be paid on the 30th of December.

The company's next dividend payment will be US$0.0075 per share. Last year, in total, the company distributed US$0.09 to shareholders. Looking at the last 12 months of distributions, U.S. Global Investors has a trailing yield of approximately 3.7% on its current stock price of US$2.43. 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 U.S. Global Investors can afford its dividend, and if the dividend could grow.

View our latest analysis for U.S. Global Investors

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. U.S. Global Investors is paying out an acceptable 69% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit U.S. Global Investors paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see U.S. Global Investors's earnings per share have dropped 7.4% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, U.S. Global Investors has lifted its dividend by approximately 4.1% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Is U.S. Global Investors worth buying for its dividend? We're not overly enthused to see U.S. Global Investors's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you're still interested in U.S. Global Investors despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example - U.S. Global Investors has 3 warning signs we think 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.