Global Water Resources' (NASDAQ:GWRS) Upcoming Dividend Will Be Larger Than Last Year's

The board of Global Water Resources, Inc. (NASDAQ:GWRS) has announced that it will be paying its dividend of $0.0248 on the 29th of December, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.2%, which shareholders will be pleased with.

Check out our latest analysis for Global Water Resources

Global Water Resources' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

EPS is set to grow by 16.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 93% which is a bit high but can definitely be sustainable.

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. The annual payment during the last 6 years was $0.28 in 2016, and the most recent fiscal year payment was $0.298. This means that it has been growing its distributions at 1.0% per annum over that time. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Global Water Resources' Dividend Might Lack Growth

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 17% per annum. 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.

Global Water Resources' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Global Water Resources' payments are rock solid. 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 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. Just as an example, we've come across 3 warning signs for Global Water Resources you should be aware of, and 2 of them shouldn't be ignored. Is Global Water Resources not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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