York Water (NASDAQ:YORW) Is Increasing Its Dividend To $0.2027

The board of The York Water Company (NASDAQ:YORW) has announced that it will be paying its dividend of $0.2027 on the 14th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 1.9%, which is in line with the average for the industry.

View our latest analysis for York Water

York Water's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, York Water was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 8.6%. If the dividend continues on this path, the payout ratio could be 57% by next year, which we think can be pretty sustainable going forward.

York Water Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.534 in 2013, and the most recent fiscal year payment was $0.811. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

York Water Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. York Water has seen EPS rising for the last five years, at 6.1% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On York Water's Dividend

Overall, we always like to see the dividend being raised, but we don't think York Water will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for York Water you should be aware of, and 1 of them doesn't sit too well with us. Is York Water not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.