Global Water Resources (NASDAQ:GWRS) Is Paying Out A Dividend Of $0.0253

The board of Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will pay a dividend of $0.0253 per share on the 30th of May. This means the dividend yield will be fairly typical at 2.9%.

Our free stock report includes 3 warning signs investors should be aware of before investing in Global Water Resources. Read for free now.

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

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before this announcement, Global Water Resources was paying out 126% of what it was earning, and not generating any free cash flows either. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Over the next year, EPS is forecast to expand by 8.3%. 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 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. 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. 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.

Global Water Resources' Dividend Might Lack Growth

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 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.

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.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Global Water Resources' payments, as there could be some issues with sustaining them into the future. 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. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 3 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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