Stock Analysis

Artesian Resources' (NASDAQ:ARTN.A) Shareholders Will Receive A Bigger Dividend Than Last Year

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NasdaqGS:ARTN.A
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Artesian Resources Corporation (NASDAQ:ARTN.A) will increase its dividend on the 19th of November to US$0.27. This will take the dividend yield to an attractive 2.7%, providing a nice boost to shareholder returns.

Check out our latest analysis for Artesian Resources

Artesian Resources' Earnings Easily Cover the Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Artesian Resources' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 3.9% over the next year. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

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NasdaqGS:ARTN.A Historic Dividend September 26th 2021

Artesian Resources Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The first annual payment during the last 10 years was US$0.76 in 2011, and the most recent fiscal year payment was US$1.07. This means that it has been growing its distributions at 3.5% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Artesian Resources has been growing its earnings per share at 7.3% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Artesian Resources' payments are rock solid. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Artesian Resources that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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