Consolidated Water (NASDAQ:CWCO) Is Due To Pay A Dividend Of $0.095

The board of Consolidated Water Co. Ltd. (NASDAQ:CWCO) has announced that it will pay a dividend on the 30th of April, with investors receiving $0.095 per share. The dividend yield is 1.4% based on this payment, which is a little bit low compared to the other companies in 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. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

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

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.30 in 2014, and the most recent fiscal year payment was $0.38. This implies that the company grew its distributions at a yearly rate of about 2.4% over that duration. 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. We are encouraged to see that Consolidated Water has grown earnings per share at 20% per year over the past five years. 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.

Our Thoughts On Consolidated Water's Dividend

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Consolidated Water you should be aware of, and 1 of them makes us a bit uncomfortable. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.