U.S. Global Investors (NASDAQ:GROW) Has Affirmed Its Dividend Of $0.0075

U.S. Global Investors, Inc.'s (NASDAQ:GROW) investors are due to receive a payment of $0.0075 per share on 30th of September. The dividend yield will be 3.5% based on this payment which is still above the industry average.

Check out our latest analysis for U.S. Global Investors

U.S. Global Investors' Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, U.S. Global Investors' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 131% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

If the trend of the last few years continues, EPS will grow by 11.7% over the next 12 months. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 71% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was $0.06, compared to the most recent full-year payment of $0.09. This means that it has been growing its distributions at 4.1% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

U.S. Global Investors' Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. U.S. Global Investors has seen EPS rising for the last five years, at 12% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

U.S. Global Investors' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about U.S. Global Investors' payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for U.S. Global Investors that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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