Global Water Resources (NASDAQ:GWRS) Has Re-Affirmed Its Dividend Of US$0.025

Global Water Resources, Inc. (NASDAQ:GWRS) will pay a dividend of US$0.025 on the 28th of February. This means the dividend yield will be fairly typical at 1.9%.

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. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 18.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 142%, which probably can't continue putting some pressure on the balance sheet.

Global Water Resources Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from US$0.28 in 2016 to the most recent annual payment of US$0.29. Dividend payments have been growing, but very slowly over the period. Global Water Resources hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Global Water Resources has seen EPS rising for the last five years, at 10% 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.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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 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 3 warning signs for Global Water Resources you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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