U.S. Global Investors (NASDAQ:GROW) Is Due To Pay A Dividend Of $0.0075

The board of U.S. Global Investors, Inc. (NASDAQ:GROW) has announced that it will pay a dividend of $0.0075 per share on the 26th of August. This makes the dividend yield 3.4%, which will augment investor returns quite nicely.

View our latest analysis for U.S. Global Investors

U.S. Global Investors' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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 certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, earnings per share could rise by 11.7% over the next year if the trend from the last few years continues. 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $0.06 in 2014, and the most recent fiscal year payment was $0.09. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that U.S. Global Investors has been growing its earnings per share at 12% a year over the past five years. 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. Strong earnings growth means U.S. Global Investors has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think U.S. Global Investors is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 2 warning signs for U.S. Global Investors that you should be aware of before investing. 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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