Global Water Resources (NASDAQ:GWRS) Has Affirmed Its Dividend Of $0.0253

The board of Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will pay a dividend of $0.0253 per share on the 30th of April. This payment means that the dividend yield will be 3.0%, which is around the industry average.

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Global Water Resources' Projections Indicate Future Payments May Be Unsustainable

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before this announcement, Global Water Resources was paying out 126% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Earnings per share is forecast to rise by 12.4% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 111%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Global Water Resources

Global Water Resources Is Still Building Its Track Record

Global Water Resources' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 9 years was $0.28 in 2016, and the most recent fiscal year payment was $0.304. Dividend payments have grown at less than 1% a year over this 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.

Global Water Resources' Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Global Water Resources has impressed us by growing EPS at 16% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

We should note that Global Water Resources has issued stock equal to 12% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Global Water Resources' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Global Water Resources that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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