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 on the 29th of August, with investors receiving $0.0253 per share. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Estimates Indicate Global Water Resources' Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the dividend made up 127% of earnings, and the company was generating negative free cash flows. 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 10.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 117%, which probably can't continue without putting some pressure on the balance sheet.

See our latest analysis for Global Water Resources

Global Water Resources Is Still Building Its Track Record

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. Since 2016, the dividend has gone from $0.28 total annually to $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.

Dividend Growth Could Be Constrained

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 seen EPS rising for the last five years, at 18% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

We should note that Global Water Resources has issued stock equal to 14% 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. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Global Water Resources that investors should take into consideration. 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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