Last update on 2024-06-27

US Global Investors (GROW) - Dividend Analysis (Final Score: 4/8)

US Global Investors (GROW) evaluated with a 4/8 dividend score, revealing performance and stability insights integral for income-focused investors.

Short Analysis - Dividend Score: 4

We're running US Global Investors (GROW) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of US Global Investors (GROW) shows a mixed picture based on 8 criteria. GROW's dividend yield is considerably lower and more volatile than the industry average, making it less attractive for income-focused investors. The company has shown highly unstable dividend growth rates and fluctuating payout ratios, suggesting inconsistent financial performance. Dividends are not always well covered by earnings or cash flow, pointing to risks in dividend sustainability. While GROW has shown a commitment to returning value to shareholders through stock repurchases over the last 20 years, its dividend history is shorter (16 years) and less stable compared to the desired 25 years. Overall, the dividend performance is considered unreliable and inconsistent based on these criteria.

Insights for Value Investors Seeking Stable Income

Given the inconsistent and unstable nature of US Global Investors (GROW)’s dividend performance, it might not be the best choice for investors seeking reliable and stable income. The company’s commitments to dividends and share repurchases show some positive signs, but the volatility in dividend yields and payouts presents risks. Investors should approach GROW with caution, considering these uncertainties in dividend sustainability and stability.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is a critical metric for income-focused investors and can signal the attractiveness of a company's dividend distributions.

US Global Investors (GROW) has a dividend yield of 1.9858%, which is considerably lower than the industry average of 4.33%. Over the last 20 years, GROW's dividend yield has shown significant volatility, peaking at 5.985% in 2012 and dipping to as low as 0.6606% in 2020. This trend indicates unstable dividend performance compared to the more consistent industry averages. The company's generally lower-than-average dividend yield could make it less appealing for income-focused investors. Moreover, this inconsistency is also reflected in the dividend per share payouts, which have been relatively small and sporadic, hinting at potential instability or conservative financial management. Given these observations, the current trend in dividend yield appears unfavorable for investors seeking reliable income.

Average annual Growth Rate higher than 5% in the last 20 years?

The dividend growth rate measures the annualized percentage rate of growth in dividends per share over a specific period. A growth rate higher than 5% indicates that the company consistently increases its dividends, suggesting robust financial health.

Over the last 20 years, US Global Investors (GROW) have demonstrated a highly unstable dividend payout pattern. With drastic fluctuations ranging from +88.88% in 2021 to -75% in 2013, and an average Dividend Ratio of -0.85, it is clear that the dividend growth rate is neither stable nor reliably above 5%. This wild variability is problematic as it reflects inconsistent profit generation or strategic shifts, making it challenging for investors to predict future income streams. Thus, this trend is concerning for dividend-focused investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio lower than 65% in the last 20 years

The 20-year average payout ratio for US Global Investors (GROW) is -16.31%. With a target threshold of under 65%, this criterion is met; however, the negative average indicates years of significant losses relative to its dividend payouts, which is not a positive sign. Although some years (like 2007 and 2008) show a healthy payout ratio of 24.93% and 33.83%, many years have negative values indicating losses. Strategically, investors should scrutinize erratic trends, especially the extreme values (-480% in 2013 and 242.18% in 2012), denoting high volatility in earnings relative to dividend payouts. Stability in payout ratios over longer periods could make GROW an attractive dividend stock, hence balancing high positive and extremely negative ratios is essential.

Dividends Well Covered by Earnings?

What does it mean for dividends to be well covered by the earnings,GDP dividends are financed by profits.

The Earnings per Share (EPS) for US Global Investors (GROW) over the past 20 years showcases significant variability. Starting from a marginally positive EPS in the early 2000s, the company has seen both peaks, such as in 2021 with an EPS of 2.1213, and troughs, as in multiple years where EPS was negative. On the other hand, their Dividends per Share (DPS) have been more stable, particularly since 2007 where GROW started paying regular dividends. However, the ratio of DPS covered by EPS varies greatly. For instance, in 2008 and 2009, the ratio was below 0.4, while in 2018 and 2019, the DPS was better covered despite EPS being much lower, with coverage ratios close to or above 1. This trend indicates that while the company has tried to maintain a consistent dividend payout, the actual earnings have sometimes struggled to support these payouts, particularly during years of negative EPS. This intermittent inconsistency can be seen as a risk for dividend sustainability, especially in a volatile earnings environment. Hence, for potential investors, it is crucial to understand these historical trends and assess whether future earnings projections align with the promised dividends.

Dividends Well Covered by Cash Flow?

Dividend coverage ratio measures how well a company can pay its dividends from its free cash flow. It is a crucial metric for assessing dividend sustainability.

Analyzing US Global Investors' dividend coverage ratio over the years reveals a fluctuating trend. For instance, in 2007 the ratio was 0.47, meaning only 47% of dividends were covered by free cash flow, indicating a riskier dividend sustainability. This dropped to 0.23 in 2008 but substantially improved to over 2.67 in 2009, suggesting strong coverage. However, in 2012 (2.06), there was another spike indicating possible overextension. Alarmingly, from 2013-2015, we see negative values (2013: -1.297, 2015: -0.381), signaling poor dividend coverage as free cash flow was negative. Despite intermittent recoveries (2017: 0.66), the more recent years (2018-2023) show fluctuating and generally low to negative ratios. For 2022, the ratio stood at 0.12 and slightly improved to 0.46 in 2023. This volatile trend questions the reliability and sustainability of GROW's dividend payouts over the long term.

Stable Dividends Since the Company Began Paying Dividends?

A stable dividend payout over 20 years, where there is no more than a 20% drop in dividends per share, is vital for income-seeking investors. It signifies reliability and predictability in income streams, fostering investor confidence.

Analyzing the dividend per share data for US Global Investors (GROW) over the past 20 years, we can observe significant fluctuations. The company began distributing dividends in 2007, peaking at $0.24 in 2008 and maintaining this through 2011. However, starting in 2012, GROW sharply reduced dividends to $0.06, followed by incremental decreases to as low as $0.0385 in 2016. The payouts have since been relatively stable around $0.036 until a notable increase to $0.068 and $0.104 in 2021 and 2022, respectively, but then dropped again in 2023 to $0.056. This pattern indicates that GROW's dividends have fluctuated widely and do not meet the stability criterion, demonstrating more than a 20% drop in several instances. Therefore, the trend is not good for income-seeking investors looking for consistent dividend income.

Dividends Paid for Over 25 Years?

Examining whether a company has consistently paid dividends for over 25 years is crucial. It provides insights into the company's stability and commitment to returning value to shareholders.

US Global Investors (GROW) has been paying dividends for approximately 16 years, starting in 2007. While they have not met the 25-year benchmark, they have shown consistency since they began. The dividend payout initially increased but later saw some reductions, particularly between 2014 and 2018, reflecting fluctuating financial performance. Despite recent increases, the irregularity, compared to a perfect 25-year track record, might concern long-term income investors. Overall, this trend is mixed: it's good they are consistent for 16 years but not meeting the rigorous 25-year standard.

Reliable Stock Repurchases Over the Past 20 Years?

This criterion assesses whether a company consistently bought back its shares over a long period, indicating a commitment to returning value to shareholders. The importance of stock repurchases is that they can signal management’s confidence in the company’s future and improve key financial ratios.

US Global Investors has demonstrated a consistent pattern of stock repurchases over the past 20 years. The number of shares outstanding decreased from 18,323,400 in 2003 to 14,638,833 in 2023, reflecting a decreasing trend with an average repurchase rate of -1.0306%. In particular, the years 2004, 2014-2023 exhibited especially reliable buyback activity. This trend is positive as it signifies management’s confidence and can enhance shareholder value by reducing the dilution of shares and potentially increasing stock prices. Overall, this consistent buyback practice is a good indicator for investors.