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Sprott Inc. (TSE:SII) Passed Our Checks, And It's About To Pay A US$0.25 Dividend

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It looks like Sprott Inc. (TSE:SII) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Sprott's shares before the 13th of May to receive the dividend, which will be paid on the 31st of May.

The company's next dividend payment will be US$0.25 per share, on the back of last year when the company paid a total of US$1.00 to shareholders. Looking at the last 12 months of distributions, Sprott has a trailing yield of approximately 2.2% on its current stock price of CA$58.41. If you buy this business for its dividend, you should have an idea of whether Sprott's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Sprott

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Sprott paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Sprott paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Sprott earnings per share are up 8.5% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Sprott's dividend payments per share have declined at 19% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

To Sum It Up

Has Sprott got what it takes to maintain its dividend payments? Sprott has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We're unconvinced on the company's merits, and think there might be better opportunities out there.

So if you want to do more digging on Sprott, you'll find it worthwhile knowing the risks that this stock faces. Our analysis shows 3 warning signs for Sprott and you should be aware of these before buying any 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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