Consolidated Water (NASDAQ:CWCO) Has Re-Affirmed Its Dividend Of US$0.085

Consolidated Water Co. Ltd. (NASDAQ:CWCO) will pay a dividend of US$0.085 on the 29th of July. The dividend yield will be 2.4% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Consolidated Water's stock price has increased by 30% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Consolidated Water

Consolidated Water's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Consolidated Water's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 125.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 53% which brings it into quite a comfortable range.

Consolidated Water Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.30 in 2012 to the most recent annual payment of US$0.34. This means that it has been growing its distributions at 1.3% 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's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Consolidated Water hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Consolidated Water's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 4 warning signs for Consolidated Water that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.