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

The board of Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will pay a dividend of US$0.025 per share on the 30th of June. Based on this payment, the dividend yield will be 2.0%, which is fairly typical for the industry.

Check out our latest analysis for Global Water Resources

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before this announcement, Global Water Resources was paying out 142% 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.

Over the next year, EPS is forecast to fall by 1.6%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 108%, which could put the dividend under pressure if earnings don't start to improve.

Global Water Resources Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from US$0.28 in 2016 to the most recent annual payment of US$0.29. Dividend payments have grown at less than 1% a year over this 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 May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that Global Water Resources' earnings per share has fallen at approximately 3.8% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Global Water Resources' Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Global Water Resources you should be aware of, and 2 of them can't be ignored. 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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