Artesian Resources (NASDAQ:ARTN.A) Will Pay A Larger Dividend Than Last Year At $0.284

Artesian Resources Corporation (NASDAQ:ARTN.A) will increase its dividend from last year's comparable payment on the 26th of May to $0.284. Based on this payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

Check out our latest analysis for Artesian Resources

Artesian Resources' Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Artesian Resources' earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 9.4%. 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.

Artesian Resources Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.791 total annually to $1.11. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, Artesian Resources has only grown its earnings per share at 3.0% per annum over the past five years. Growth of 3.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Artesian Resources' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Artesian Resources is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Artesian Resources (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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