York Water (NASDAQ:YORW) Is Paying Out A Larger Dividend Than Last Year

Simply Wall St
November 26, 2021
Source: Shutterstock

The board of The York Water Company (NASDAQ:YORW) has announced that it will be increasing its dividend on the 14th of January to US$0.19. Based on the announced payment, the dividend yield for the company will be 1.6%, which is fairly typical for the industry.

View our latest analysis for York Water

York Water's Dividend Is Well Covered By Earnings

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. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 2.9% over the next year. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

NasdaqGS:YORW Historic Dividend November 27th 2021

York Water Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2011, the first annual payment was US$0.52, compared to the most recent full-year payment of US$0.78. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

We Could See York Water's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. York Water has impressed us by growing EPS at 5.6% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

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. While York Water is earning enough to cover the payments, the cash flows are lacking. We don't think York Water is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 1 warning sign for York Water that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.