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U.S. Global Investors, Inc.'s (NASDAQ:GROW) investors are due to receive a payment of $0.0075 per share on 26th of August. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.
View our latest analysis for U.S. Global Investors
U.S. Global Investors' Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, U.S. Global Investors was paying out a very large proportion of what it was earning and 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. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.06 in 2014 to the most recent total annual payment of $0.09. This means that it has been growing its distributions at 4.1% per annum over that time. 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.
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. 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. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
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.