Yahoo Finance We Wouldn't Be Too Quick To Buy Gold Resource Corporation (NYSEMKT:GORO) Before It Goes Ex-Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gold Resource Corporation (NYSEMKT:GORO) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 9th of April in order to be eligible for this dividend, which will be paid on the 23rd of April.
Gold Resource's next dividend payment will be US$0.0033 per share, on the back of last year when the company paid a total of US$0.04 to shareholders. Based on the last year's worth of payments, Gold Resource stock has a trailing yield of around 1.4% on the current share price of $2.87. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Gold Resource has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Gold Resource
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. Gold Resource reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Gold Resource didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 12% of its free cash flow in the last year.
Click here to see how much of its profit Gold Resource paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Gold Resource was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
We'd also point out that Gold Resource issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Gold Resource's dividend payments per share have declined at 20% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Remember, you can always get a snapshot of Gold Resource's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
Should investors buy Gold Resource for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not that we think Gold Resource is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
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 Gold Resource. Our analysis shows 3 warning signs for Gold Resource that we strongly recommend you have a look at before investing in the company.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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