Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy Sprott Inc. (TSE:SII) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sprott Inc. (TSE:SII) is about to trade ex-dividend in the next 3 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Sprott's shares on or after the 11th of August will not receive the dividend, which will be paid on the 29th of August.
The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$1.00 per share to shareholders. Last year's total dividend payments show that Sprott has a trailing yield of 2.8% on the current share price of CA$46.78. If you buy this business for its dividend, you should have an idea of whether Sprott's dividend is reliable and sustainable. As a result, readers should always check whether Sprott has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Sprott
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sprott paid out 96% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see how much of its profit Sprott paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Sprott's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sprott has seen its dividend decline 19% per annum on average over the past 10 years, which is not great to see.
Final Takeaway
From a dividend perspective, should investors buy or avoid Sprott? While we're glad to see that its earnings aren't shrinking, we're not enamored of the fact that it's paying out 96% of last year's earnings. Sprott 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.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Sprott. To help with this, we've discovered 1 warning sign for Sprott that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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