Global Water Resources (NASDAQ:GWRS) Is Due To Pay A Dividend Of $0.0253

The board of Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will pay a dividend on the 31st of March, with investors receiving $0.0253 per share. This means the dividend yield will be fairly typical at 2.6%.

View our latest analysis for Global Water Resources

Global Water Resources' Projections Indicate Future Payments May Be Unsustainable

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, the dividend made up 126% 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 12.4% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 99% over the next year.

Global Water Resources Is Still Building Its Track Record

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. Since 2016, the dividend has gone from $0.28 total annually to $0.304. 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.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Global Water Resources has been growing its earnings per share at 18% a year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Global Water Resources that investors should know about before committing capital to this stock. 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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