U.S. Global Investors' (NASDAQ:GROW) Dividend Will Be $0.0075

The board of U.S. Global Investors, Inc. (NASDAQ:GROW) has announced that it will pay a dividend on the 30th of June, with investors receiving $0.0075 per share. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

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Estimates Indicate U.S. Global Investors' Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Looking forward, EPS could fall by 31.4% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 1,157%, which could put the dividend in jeopardy if the company's earnings don't improve.

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

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 2015, 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. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. U.S. Global Investors' earnings per share has shrunk at 31% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of U.S. Global Investors' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help U.S. Global Investors make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for U.S. Global Investors (of which 1 shouldn't be ignored!) you should know about. 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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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.