Do These 3 Checks Before Buying U.S. Global Investors, Inc. (NASDAQ:GROW) For Its Upcoming Dividend
It looks like U.S. Global Investors, Inc. (NASDAQ:GROW) is about to go ex-dividend in the next 2 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, U.S. Global Investors investors that purchase the stock on or after the 15th of December will not receive the dividend, which will be paid on the 29th of December.
The company's next dividend payment will be US$0.0075 per share, and in the last 12 months, the company paid a total of US$0.09 per share. Based on the last year's worth of payments, U.S. Global Investors stock has a trailing yield of around 3.6% on the current share price of US$2.47. If you buy this business for its dividend, you should have an idea of whether U.S. Global Investors's dividend is reliable and sustainable. As a result, readers should always check whether U.S. Global Investors has been able to grow its dividends, or if the dividend might be cut.
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 distributed an unsustainably high 138% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
See our latest analysis for U.S. Global Investors
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?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. U.S. Global Investors's earnings per share have plummeted approximately 60% a year over the previous five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. U.S. Global Investors has delivered 4.1% dividend growth per year on average over the past 10 years. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. U.S. Global Investors is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
Final Takeaway
Is U.S. Global Investors an attractive dividend stock, or better left on the shelf? Not only are earnings per share shrinking, but U.S. Global Investors is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. U.S. Global Investors doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that being said, if you're still considering U.S. Global Investors as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 4 warning signs we've spotted with U.S. Global Investors (including 2 which are concerning).
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.
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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.