Global Water Resources' (NASDAQ:GWRS) Dividend Will Be US$0.025

Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will pay a dividend of US$0.025 per share on the 31st of May. This means that the annual payment will be 2.1% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Global Water Resources

Global Water Resources Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 0.3% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 137%, which is a bit high and could start applying pressure to the balance sheet.

Global Water Resources Doesn't Have A Long Payment History

It is great to see that Global Water Resources has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The first annual payment during the last 6 years was US$0.28 in 2016, and the most recent fiscal year payment was US$0.29. Dividend payments have been growing, but very slowly over the period. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 2.7% per annum over the last five years, which admittedly is a bit slow. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. This gives limited room for the company to raise the dividend in the future.

Global Water Resources' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Global Water Resources is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Global Water Resources (2 are a bit concerning!) that you should be aware of before investing. 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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