Consolidated Water (NASDAQ:CWCO) Has Affirmed Its Dividend Of $0.095

The board of Consolidated Water Co. Ltd. (NASDAQ:CWCO) has announced that it will pay a dividend of $0.095 per share on the 30th of April. This payment means the dividend yield will be 1.3%, which is below the average for the industry.

Check out our latest analysis for Consolidated Water

Consolidated Water's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Consolidated Water's dividend was only 24% of earnings, however it was paying out 115% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to fall by 28.0%. If the dividend continues along recent trends, we estimate the payout ratio could be 36%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Consolidated Water Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.30 in 2014, and the most recent fiscal year payment was $0.38. This works out to be a compound annual growth rate (CAGR) of approximately 2.4% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Consolidated Water has seen EPS rising for the last five years, at 20% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Consolidated Water's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Consolidated Water has 2 warning signs (and 1 which shouldn't be ignored) we think 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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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.