Global Water Resources (NASDAQ:GWRS) Has Announced A Dividend Of $0.0246

The board of Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will pay a dividend of $0.0246 per share on the 31st of October. Based on this payment, the dividend yield will be 2.4%, which is fairly typical for the industry.

See our latest analysis for Global Water Resources

Global Water Resources Doesn't Earn Enough To Cover Its Payments

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, the dividend made up 136% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

EPS is set to fall by 8.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 121%, which could put the dividend in jeopardy if the company's earnings don't improve.

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. Since 2016, the dividend has gone from $0.28 total annually to $0.295. Dividend payments have been growing, but very slowly over the period. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Global Water Resources Might Find It Hard To Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Global Water Resources has seen EPS rising for the last five years, at 15% per annum. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Global Water Resources has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Global Water Resources (of which 3 are significant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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